Financial Statement 2019 - Tokio Marine

Registration No.

199801001430 (457556-X)

TOKIO MARINE LIFE INSURANCE MALAYSIA BHD. (Incorporated in Malaysia)

STATUTORY FINANCIAL STATEMENTS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019

Registration No.

199801001430 (457556-X)


CONTENTS

PAGE (S)

DIRECTORS’ REPORT 1 - 24

STATEMENT BY DIRECTORS 25

STATUTORY DECLARATION 25

INDEPENDENT AUDITORS’ REPORT 26 - 29

FINANCIAL STATEMENTS

STATEMENT OF FINANCIAL POSITION 30

STATEMENT OF COMPREHENSIVE INCOME 31 - 32

STATEMENT OF CHANGES IN EQUITY 33

STATEMENT OF CASH FLOWS 34 - 35

NOTES TO THE FINANCIAL STATEMENTS 36 - 122

Registration No.

199801001430 (457556-X)

1


DIRECTORS’ REPORT

The Directors are pleased to submit their report to the member together with the audited financial statements of the Company for the financial year ended 31 December 2019.

PRINCIPAL ACTIVITY

The principal activity of the Company is the underwriting of all classes of life insurance business, including investment-linked business. There has been no significant change in the nature of this activity during the financial year.

FINANCIAL RESULTS

RM’000

Net profit for the financial year 20,277 ════════

DIVIDENDS

The amount of dividend declared and paid by the Company since the end of the previous financial year was as follows:

RM’000 In respect of the financial year ended 31 December 2018:

Final single tier dividend of 16.24 sen per ordinary shares, paid on 28 June 2019 36,700

════════

As at 6 May 2020, the Directors have not recommended any final dividend for the financial year ended 31 December 2019.

SHARE CAPITAL

There was no issuance of new ordinary shares during the financial year.

RESERVES AND PROVISIONS

All material transfers to or from reserves or provisions during the financial year are disclosed in the financial statements.

PROVISION FOR INSURANCE LIABILITIES

Before the financial statements of the Company were prepared, the Directors took reasonable steps to ascertain that there was adequate provision for the insurance liabilities in accordance with the valuation methods specified in Part D of the Risk-Based Capital Framework (“RBC Framework”) issued by Bank Negara Malaysia (“BNM”) for insurers.

Registration No.

199801001430 (457556-X)

2


DIRECTORS’ REPORT (CONTINUED)

BAD AND DOUBTFUL DEBTS

Before the financial statements of the Company were prepared, the Directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and satisfied themselves that all known bad debts had been written off and adequate allowance had been made for doubtful debts.

At the date of this report, the Directors of the Company are not aware of any circumstances which would render the amounts written off for bad debts or the amounts of the allowance for doubtful debts in the financial statements of the Company inadequate to any substantial extent.

CURRENT ASSETS

Before the financial statements of the Company were prepared, the Directors took reasonable steps to ensure that any current assets other than debts, which were unlikely to be realised in the ordinary course of business, including the value of current assets as shown in the accounting records of the Company have been written down to an amount which the current assets might be expected to realise.

At the date of this report, the Directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the Company misleading.

VALUATION METHODS

At the date of this report, the Directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Company misleading or inappropriate.

CONTINGENT AND OTHER LIABILITIES

At the date of this report, there does not exist:

(a) any charge on the assets of the Company that has arisen since the end of the financial year which secures the liability of any other person; or

(b) any contingent liability of the Company which has arisen since the end of the financial year.

No contingent or other liability of the Company has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Company to meet its obligations as and when they fall due.

For the purpose of this paragraph, contingent or other liabilities do not include liabilities arising from contracts of insurance underwritten in the ordinary course of business of the Company.

Registration No.

199801001430 (457556-X)

3



CHANGE OF CIRCUMSTANCES

At the date of this report, the Directors are not aware of any circumstances, not otherwise dealt with in this report or the financial statements of the Company which would render any amount stated in the financial statements misleading.

ITEMS OF AN UNUSUAL NATURE

The results of the operations of the Company for the financial year were not, in the opinion of the Directors, substantially affected by any item, transaction or event of a material and unusual nature.

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors, to affect substantially the results of the operations of the Company for the financial year in which this report is made.

CORPORATE GOVERNANCE DISCLOSURE

A. BOARD OF DIRECTORS

The Directors in office during the financial year and during the period from the end of the financial year to the date of the report are:

Tan Sri Dato’ Dr Yahya Bin Awang Chairman, Non-Independent Non-Executive Director Datuk Leong Kam Weng Independent Director Chuah Sue Yin Independent Director Tang Loo Chuan Executive Director U Chen Hock Independent Director (appointed on 1 April 2020)

The Board of Directors (“Board”) has the overall responsibility for promoting sustainable growth and financial soundness of the Company, and for ensuring reasonable standards of fair dealing, without undue influence from any party. This includes a consideration of the long-term implications of the Board’s decisions on the Company and its customers, officers and the general public.

The Board is responsible for:

(a) reviewing and approving the strategic plan for the Company including the 3-year IT and cybersecurity strategic plans;

(b) reviewing and approving the Company’s overall risk strategy, risk appetite including the technology risk appetite; and oversee its implementation;

(c) identifying principal risks and ensure the implementation of appropriate systems to manage these risks, including application of immediate remedial measures should the need arise;

(d) ensuring the Company maintains an appropriate level and quality of capital for its risk profile and business plan;

Registration No.

199801001430 (457556-X)

4



CORPORATE GOVERNANCE DISCLOSURE (CONTINUED)

A. BOARD OF DIRECTORS (CONTINUED)

The Board is responsible for: (continued)

(e) approving and overseeing the effective implementation of sound and robust Technology Risk Management Framework (“TRMF”) and Cyber Resilience Framework (“CRF”), and ensure the risk assessments undertaken in relation to material technology applications submitted to BNM are robust and comprehensive.

(f) overseeing the conduct of the Company’s business, including that of participating business, to ensure sound management by the senior management and to evaluate whether the business is properly managed towards achieving corporate objectives, and that the Company’s dealings with shareholders, policyholders, claimants and creditors are conducted in a fair and equitable manner;

(g) safeguarding the integrity and credibility of the Company, including ensuring that the senior management and all levels of employees conduct business with highest level of moral behavior and in a manner that instills public confidence;

(h) providing a clear framework of objectives and policies for the senior management to operate, including the setting of authority limits and reporting lines;

(i) reviewing and be responsible for the adequacy and integrity of the Company’s internal control systems and management information systems, including policies and procedures for compliance with applicable laws, regulations, rules, directives and guidelines;

(j) developing, implementing and maintaining an effective communications policy that enables both the Board and the senior management to communicate effectively with its shareholders, stakeholders and public;

(k) safeguarding the interests of policyholders and shareholders with trustworthy, prudent, efficient and able administration; and

(l) adhering to sound corporate governance principles in the appointment or reappointment of Directors, Chief Executive Officer and Company Secretary, the structure and composition of the Board and the individual Board committees as well as relevant disclosures.

The detailed responsibilities of the Board is set out in the Board Charter, which is available at the website, www.tokiomarine.com.

A1 Composition of the Board

The Board is made up of 3 Independent Non-Executive Directors, 1 Non-Independent Non-Executive Director and 1 Executive Director. The appointments and re-appointments of all Board members were approved by BNM.

The Board comprises members from diverse backgrounds and qualifications and bring a wide range of financial and commercial experience to the Board. Collectively, they provide the necessary business acumen, knowledge, capabilities and competencies to the Company. This composition is the right mix for proper governance of the Company.

Registration No.

199801001430 (457556-X)

5





A1 Composition of the Board (continued)

All members of the Board complied with BNM’s requirements on the minimum criteria of “A Fit and Proper Person” as prescribed under the Financial Services Act, 2013 (“FSA 2013”).

The profiles of the Board members are as follows:

Tan Sri Dato’ Dr Yahya Bin Awang – Chairman, Non-Independent Non-Executive Director

Working experience:

Tan Sri Yahya was appointed as Chairman and Director of our Company on 3 July 2007. He is a member of the Audit Committee, Nominating Committee, Remuneration Committee and Risk Management and Compliance Committee. On 3 July 2019, he was redesignated to Non-Independent Non-Executive Director following Bank Negara Malaysia’s approval for his re-appointment.

Tan Sri Yahya graduated from Monash University, Australia with a Bachelor of Medicine and Bachelor of Surgery degree in December 1974 and in October 1984, he received a Diploma of Fellowship from The Royal College of Surgeons and Physicians of Glasgow, Scotland, United Kingdom.

After completing his housemanship in Hospital Sultanah Aminah in Johor Bahru in December 1975, Tan Sri Yahya became a Medical Officer in Kota Tinggi District Hospital from January 1976 to April 1976, and subsequently, a Medical Officer in Hospital Sultanah Aminah from May 1976 to December 1978. He then took on the position of Senior Medical Officer in the Department of Surgery in Kuala Lumpur General Hospital in January 1979. In January 1980, Tan Sri Yahya obtained the Fellowship of the Royal College of Surgeons and Physicians of Glasgow, Scotland, United Kingdom as a training surgeon until June 1981. Thereafter, in July 1981, Tan Sri Yahya joined the Department of Cardiothoracic Surgery at Brompton Hospital, London, United Kingdom as a Senior Surgical Resident, and became the Surgical Registrar there from January 1983 to November 1983. He subsequently returned to Malaysia and joined the Kuala Lumpur General Hospital, first as a Cardiothoracic Surgeon from December 1983 to June 1985, and then as the Head and Senior Consultant Cardiothoracic Surgeon from July 1985 to June 1992 and finally, as the Medical Consultant Surgeon from July 1992 to September 1998. From October 1998 to October 2002, Tan Sri Yahya took on the position as the Medical Director and Head and Senior Consultant Cardiothoracic Surgeon at the National Heart Institute of Malaysia and subsequently as the Medical Director and acting Chief Executive Officer of the National Heart Institute of Malaysia from November 2002 until February 2004. Tan Sri Yahya was also the visiting Consultant Cardiothoracic Surgeon at the Selangor Specialist Hospital Sdn Bhd between August 2006 and August 2015 and a visiting Consultant Cardiothoracic Surgeon at Damansara Specialist Hospital Sdn Bhd between February 2004 and May 2018.

Registration No.

199801001430 (457556-X)

6






The profiles of the Board members are as follows: (continued)

Tan Sri Dato’ Dr Yahya Bin Awang – Chairman, Non-Independent Non-Executive Director (continued)

Working experience: (continued)

Between April 2016 and December 2018, Tan Sri Yahya was a visiting Consultant Cardiothoracic Surgeon at the Prince Court Medical Centre Sdn Bhd. Since December 2017, he has been a resident Consultant Cardiothoracic Surgeon at the Cardiac Vascular Sentral (Kuala Lumpur) Sdn Bhd.

Further, since April 1993, he has been a committee member and the founding Chairman of the Malaysian Board of Cardiothoracic Surgery and a member of the Malaysian Association of Thoracic & Cardiovascular Surgery. Since September 2005, he is a member and Chairman of the Board of Governors of International Medical University Malaysia. From July 2011 until October 2016, he was the Pro-Chancellor of Universiti Teknologi Malaysia.

In 2013, Tan Sri Yahya was awarded the Merdeka Award for his contribution to pioneering the development of clinical research and cardiac surgery in Malaysia and for his instrumental role in the establishment of the National Heart Institute of Malaysia.

Tan Sri Yahya currently holds directorships in a number of public and private companies and foundations, including MPHB Capital Berhad, Heartz Surgery Sdn Bhd, SH Derm Sdn Bhd, Ivolis Sdn Bhd, Cardiac Vascular Sentral (Kuala Lumpur) Sdn Bhd, Cardiac Vascular Sentral Holdings (Malaysia) Sdn Bhd, Gribbles Pathology Malaysia, Perikatan Asia Sdn Bhd, Yayasan Wah Seong, Sultan Ibrahim Johor Foundation and RHB Foundation.

Registration No.

199801001430 (457556-X)

7







Datuk Leong Kam Weng – Independent Director

Working experience:

Datuk Leong was appointed as a Director of our Company on 1 July 2015. He is the chairman of the Audit Committee, Nominating Committee and Remuneration Committee and a member of the Risk Management and Compliance Committee.

Datuk Leong graduated with a Bachelor of Economics degree and a Bachelor of Laws degree from Monash University, Australia in April 1986 and May 1988 respectively. He is a Chartered Accountant of the Malaysian Institute of Accountants since October 2004 and a Fellow of CPA Australia since September 2013. He was called to the Malaysian Bar in January 1989 and is a certified mediator on the panel of the Malaysian Mediation Centre, Bar Council Malaysia.

Datuk Leong was practising as an advocate and solicitor in Chooi & Co from January 1989 to January 1992, after which he joined TA Securities Sdn Bhd as the Manager of the Legal Department to manage and oversee the legal affairs for the TA Enterprise Berhad and TA Global Berhad group of companies in February 1992. He became the Senior Manager / Head of the Legal Department of TA Securities Sdn. Bhd. in July 1993. Between November 1993 and October 1995, he was also made the Vice President of the International Division of TA Enterprise Berhad where his responsibilities include the identification of investment opportunities in the Asia Pacific region, and the negotiation and implementation of such investments. Datuk Leong subsequently took on the position of General Manager cum Executive Director in Credit Leasing Corporation Sdn Bhd (which was, at the time, a wholly-owned subsidiary of TA Enterprise Berhad) from November 1995 to February 1997, where he oversaw and managed the operations of the company. From March 1997 to June 1998, he joined TA Bank of Philippines Inc as an Executive Director where he assisted the Chief Executive Officer in the management of the bank, in particular in relation to corporate finance matters. He was also a member of the bank’s Assets and Lending Committee which oversaw the approval of loans and the determination of lending policies and interest rates. He returned to Malaysia and became the Chief Executive Officer of TA Securities Berhad from June 1998 to July 1999. Since July 1999, he has been a Partner at a law firm, Messrs Iza Ng Yeoh & Kit since July 1999 and is now the Joint Managing Partner of the said law firm.

Datuk Leong currently holds directorships in a number of public and private companies, including TA Enterprise Berhad, TA Global Berhad, Asian Outreach (Malaysia) Bhd, Xin Hwa Holdings Berhad, Pecca Group Berhad, Riang Satria Sdn Bhd and Keep Linked Sdn Bhd.

Registration No.

199801001430 (457556-X)

8







Chuah Sue Yin – Independent Director

Working experience:

Ms. Chuah was appointed as a Director of our Company on 8 May 2016. She is the chairperson of the Risk Management and Compliance Committee and a member of the Audit Committee, Nominating Committee and Remuneration Committee.

Ms. Chuah graduated with a Bachelor of Science with Honours in Management Science from the University of Warwick, United Kingdom in July 1994. She is a Chartered Accountant of the Malaysian Institute of Accountants since April 1999 and a Fellow member of the Institute of Chartered Accountants in England & Wales since April 2012. She is also an associate of the Malaysian Institute of Taxation (now known as Chartered Tax Institute of Malaysia) since August 2007.

Further, Ms. Chuah is an approved company auditor under the Companies Act, 1965 (which has since been repealed by the Act), a Registered Auditor of Public Interest Entity under the Securities Commission Malaysia Act, 1993, an Auditor of Co-operative Societies under the Co-operatives Societies Act, 1993, a Registered ASEAN Chartered Professional Accountant, a tax agent under the Income Tax Act, 1967.

Ms. Chuah began her career in September 1994 as a Senior Accountant in Coopers & Lybrand Birmingham, United Kingdom where she performed and managed various audit assignments. Thereafter, she joined PricewaterhouseCoopers London, United Kingdom as the Supervisor of the Risk Assurance Division from September 1997 to December 1998 where she performed and managed various risk management and computer audit assignments. She subsequently returned to Malaysia and joined PCCO PLT as a Senior Manager from January 1999 to April 2004. She became a Partner of PCCO PLT in April 2004 and since April 2007, she has been the Managing Partner of PCCO PLT. She oversees the finance and operations of the firm and manages the financial accounting and reporting, internal and external audits and due diligence portfolio of PCCO PLT.

She has also been the Director of PCCO Management Services Sdn Bhd (“PCCO Management”) since January 1999 and PCCO Tax Services Sdn Bhd (“PCCO Tax”) since April 2004. Further, she has been the Managing Director of PCCO Tax and PCCO Management since April 2007, where she oversees the finance and operations of the companies, manages tax portfolio of PCCO Tax and manages the financial accounting and reporting, internal audit, due diligence and human resource functions of PCCO Management.

Ms. Chuah currently holds directorships in a number of public and private companies including BP Plastics Holding Bhd, PCCO Management and PCCO Tax.

Registration No.

199801001430 (457556-X)

9



CORPORATE GOVERNANCE DISCLOSURE (CONTINUED) A. BOARD OF DIRECTORS (CONTINUED) A1 Composition of the Board (continued) The profiles of the Board members are as follows: (continued)

Tang Loo Chuan – Executive Director

Working experience: Mr. Tang was appointed as a Director of our Company on 8 May 2016. He is a member of the Nominating Committee. He was a Non-Independent Non-Executive Director and also a member of the Remuneration Committee and the Risk Management and Compliance Committee until 7 May 2018. On 8 May 2018, he was redesignated to Non-Independent Executive Director and on the same day, relinquished his position as member of the Remuneration Committee and the Risk Management and Compliance Committee following BNM’s approval for his re-appointment. Mr. Tang graduated from Nanyang Technological University, Singapore with a Bachelor of Business (specialising in Actuarial Science) in May 1994. Since July 2003, he is a Fellow of the Institute of Actuaries, United Kingdom (now known as Institute & Faculty of Actuaries). He began his career in May 1994 as a Senior Actuarial Assistant in the Insurance Corporation of Singapore Limited where he oversaw product pricing and valuation functions as well as the customisation of actuarial valuation software. He subsequently joined The Asia Life Assurance Society Limited (Singapore) as the Actuarial Manager from May 1997 to May 2002 where he oversaw product pricing, product development and stress test reporting. He then took on the position of an Actuarial Manager in John Hancock Life Assurance Company Limited from May 2002 to May 2004 where he oversaw product pricing, product development, stress test reporting and experience studies. Mr. Tang subsequently joined Manulife (Singapore) Pte Limited (following the merger of Manulife (Singapore) Pte Ltd and John Hancock Life Assurance Company Ltd in 2004) as the Vice President and Appointed Actuary, from May 2004 to May 2008, where he was the head of pricing and local risk-based capital reporting. From June 2008 to March 2010, Mr. Tang was the Appointed Actuary of UOB Life Assurance Ltd (now Pru Life Assurance Ltd) where he oversaw product pricing, product development, local risk-based capital framework, stress test reporting, reinsurance and participating fund governance. He was also a member of the company’s investment committee and bancassurance committee. He subsequently joined AXA Life Insurance Singapore Pte Ltd from June 2010 to September 2011 as the Chief Actuary and Appointed Actuary where he similarly oversaw product pricing, local risk-based capital framework, stress test reporting, reinsurance, par fund governance and asset liability management. During the same period, he was also a member the Agency Compensation Review Workgroup and the Local Investment Committee of AXA Life Insurance Singapore Pte Ltd. He then joined Aviva Ltd from October 2011 to January 2015 as an Appointed Actuary, where he was also the deputy to the chief financial officer and oversaw product pricing, local risk-based capital framework, capital management, stress test reporting, reinsurance, participating fund governance, asset liability management and experience studies.

Registration No.

199801001430 (457556-X)

10







Tang Loo Chuan – Executive Director (continued)


Since January 2015, he has been the Senior Vice President of the Life Actuarial Department of Tokio Marine Asia Pte. Ltd. (“TMAP”). He is also a corporate representative of Tokio Marine Life Insurance Singapore Ltd. (“TMLIS”) in the Company. Mr. Tang oversees, among other things, product pricing, capital management policy, investment policy, participating fund governance and experience studies. He is a member of the Executive Committee of TMAP, and Asset Liability Management & Investment Committee of TMLIS. He also plays a regional role in establishing the business strategies for the Tokio Marine Group’s life insurance business (outside Japan).

Mr. Tang currently holds directorships in a number of life insurance companies, namely PT Tokio Marine Life Insurance Indonesia, Edelweiss Tokio Life Insurance Company Limited and TMLIS.

U Chen Hock – Independent Director

Working experience:

Mr. U Chen Hock was appointed as a Director of our Company on 1 April 2020. He is a member of the Audit Committee, Nominating Committee and Risk Management and Compliance Committee.

Mr. U Chen Hock holds a Bachelor of Economics and Management (Hon) degree from the National University of Malaysia (UKM). He is a Certified Financial Planner (CFP), an accreditation awarded by the Financial Planning Standards Board, USA. Mr U had also attended numerous Senior Executive Leadership Programmes at INSEAD, London Business School, Duke Corporate Education and IMD during his long banking career.

Mr U is a career banker with more than 36 years of extensive experience in corporate, commercial, investment and consumer banking. He completed 30 years of his long banking career at a global banking group where he had assumed senior leadership roles in Malaysia and Taiwan and at the Asia Pacific Headquarters in Hong Kong. He left the global banking group in July 2010.

Registration No.

199801001430 (457556-X)

11







U Chen Hock – Independent Director (continued)


Following his overseas stint, Mr U returned to Malaysia to join a local investment bank where he was appointed as its Chief Executive Officer. Following the successful merger of the investment bank with the investment banking arm of one of the largest Malaysian banking groups, Mr. U was rehired as Executive Director of the local banking group, first to head its expanded international banking division and then as head of its group retail banking business. He left the group upon retirement in April 2017.

Mr U was Chairman of the Financial Planning Association of Malaysia for 2 terms between 2005 to 2007.

Mr. U currently sits on the Board of AmBank (M) Berhad (“AmBank”) and he is the Chairman of the Risk Management Committee and a Member of the Audit and Examination Committee of AmBank.

None of the Directors hold any share in the Company.

All Directors are required to attend the in-house orientation and education programmes within 3 months from his/her date of appointment and the Financial Institutions Directors’ Education Programme developed by BNM and Perbadanan Insurans Deposit Malaysia in collaboration with the International Centre for Leadership in Finance within one year from his/her date of appointment.

In order to keep the Directors abreast with the dynamic and complex business environments as well as new statutory and regulatory requirements, a budget for Directors’ trainings is provided each year by the Company. During the financial year, several in-house trainings had been conducted. All Directors had attended various training programmes/seminars during the financial year and the Nominating Committee reviewed the list of training programmes/seminars attended by the Directors and was satisfied with the training programmes/seminars attended by the Directors.

Registration No.

199801001430 (457556-X)

12





A2 Board Meetings

The Board held seven (7) meetings during the financial year and the attendance of the Board members was as follows:

Board of Directors Number of meetings attended

Tan Sri Dato’ Dr Yahya Bin Awang 7/7 Datuk Leong Kam Weng 7/7 Chuah Sue Yin 7/7 Tang Loo Chuan 7/7 U Chen Hock Not Applicable *

* Mr. U Chen Hock was appointed as an Independent Director of the Company on 1 April 2020.

A3 Board Committees

The Board has established the following four (4) Board Committees operating on the terms of reference approved by the Board, to assist the Board in the execution of its responsibilities.

Nominating Committee (“NC”)

The composition of the NC as at the date of this report are as follows:

Datuk Leong Kam Weng Chairman, Independent Director Tan Sri Dato’ Dr Yahya Bin Awang Non-Independent Non-Executive Director Chuah Sue Yin Independent Director Tang Loo Chuan Executive Director U Chen Hock Independent Director (appointed on 1 April 2020)

The NC is responsible for:

(a) establishing a mechanism for formal assessment and carry out annual evaluation to assess the performance and the effectiveness of the Board as a whole, the contribution by each Director to the effectiveness of the Board, the contribution of the Board’s various committees, and the performance of the Chief Executive Officer;

(b) establishing the minimum requirements for the Board and the Chief Executive Officer to perform their responsibilities effectively;

(c) recommending and assessing the nominees for directorship, nominees for Board Committees membership, as well as nominees for the Chief Executive Officer or senior management or Company Secretary. This includes assessing the Directors and the Chief Executive Officer or senior management or Company Secretary proposed for re-appointment where applicable, before an application is submitted to BNM;

(d) recommending to the Board the removal of a Director or Chief Executive Officer or Company Secretary if he/she is ineffective, errant or negligent in discharging his/her responsibilities;

Registration No.

199801001430 (457556-X)

13





A3 Board Committees (continued)

Nominating Committee (“NC”) (continued)

The NC is responsible for: (continued)

(e) ensuring Directors, Chief Executive Officer, senior management and Company Secretary are assessed under the Fit and Proper requirements at time of appointment, on an annual basis or as and when circumstance changed that may affect the ability to meet the minimum requirements;

(f) assisting the Board in regular review of succession plans for the Board and Board Committees; and

(g) ensuring that all Directors undergo appropriate induction programmes and regularly review the training needs for Directors to ensure the Directors received continuous training.

The detailed terms of reference of the NC is set out in the Board Charter, which is available at the website, www.tokiomarine.com.

The NC held four (4) meetings during the financial year and the attendance of the NC members was as follows:

Members of the NC Number of meetings attended:

Datuk Leong Kam Weng 4/4 Tan Sri Dato’ Dr Yahya Bin Awang 4/4 Chuah Sue Yin 4/4 Tang Loo Chuan 4/4 U Chen Hock Not Applicable *

* Mr. U Chen Hock was appointed as a member of NC on 1 April 2020.

Remuneration Committee (“RC”)

The composition of the RC as at the date of this report are as follows:

Datuk Leong Kam Weng Chairman, Independent Director Tan Sri Dato’ Dr Yahya Bin Awang Non-Independent Non-Executive Director Chuah Sue Yin Independent Director

The RC is responsible for:

(a) recommending and periodically review the remuneration of Directors on the Board, particularly on whether the remuneration remains appropriate to each director’s contribution, taking into account the level of expertise, commitment and responsibilities undertaken; and

Registration No.

199801001430 (457556-X)

14






Remuneration Committee (“RC”) (continued)

The RC is responsible for: (continued)

(b) recommending and periodically review the remuneration framework for the Company, where the framework should:

(i) be in line with the business and risk strategies, corporate values and long-term interests of the Company;

(ii) promote prudent risk-taking behaviour and encourage individuals to act in the interests of the Company as a whole, taking into account the interests of customers; and

(iii) be designed and implemented with input from the control functions and the Risk Management and Compliance Committee to ensure that risk exposures and risk outcomes are adequately considered.

The detailed terms of reference of the RC is set out in the Board Charter, which is available at the website, www.tokiomarine.com.

The RC held two (2) meetings during the financial year and the attendance of the RC members was as follows:

Members of the RC Number of meetings attended

Datuk Leong Kam Weng 2/2 Tan Sri Dato’ Dr Yahya Bin Awang 2/2 Chuah Sue Yin 2/2

Audit Committee (“AC”)

The composition of the AC as at the date of this report are as follows:

Datuk Leong Kam Weng Chairman, Independent Director Tan Sri Dato’ Dr Yahya Bin Awang Non-Independent Non-Executive Director Chuah Sue Yin Independent Director U Chen Hock Independent Director (appointed on 1 April 2020)

The AC is established pursuant to the requirements of BNM/RH/PD/029-9: Guidelines on Corporate Governance to assist the Board in fulfilling its oversight responsibilities by reviewing the financial information that will be provided to stakeholders, the system of internal controls that the management and the Board have established and the audit processes. In doing so, the AC is providing an avenue for external and internal auditors to effectively voice their findings.

Registration No.

199801001430 (457556-X)

15






Audit Committee (“AC”) (continued)

The AC is responsible for:

(a) appointing the external auditors having regarded their independence, objectivity, performance, nature and scope of audit, as well as approving the terms of audit engagement and any provision of non-audit services by them where required;

(b) reviewing the audit plans, findings and recommendations by the external auditors and statutory financial statements of the Company, including the discussion of the results and findings arising from the external audits and ensuring that senior management is taking necessary corrective actions in a timely manner to address control weaknesses, non-compliance with laws, regulatory requirements, policies and other problems identified by the internal audit and other control functions;

(c) considering any related-party transactions that may arise within the Company or Tokio Marine group of companies;

(d) reviewing the adequacy of the scope, functions and resources of internal audit function to perform audits including technology audits, given the size and complexity of the Company’s operations; and

(e) reviewing the internal audit programme and findings of the internal audit process and where necessary, ensuring that appropriate actions are taken on the recommendations of internal audit function.

The detailed terms of reference of the AC is set out in the Board Charter, which is available at the website, www.tokiomarine.com.

The AC held four (4) meetings during the financial year and the attendance of the AC members was as follows:

Members of the AC Number of meetings attended

Datuk Leong Kam Weng 4/4 Tan Sri Dato’ Dr Yahya Bin Awang 4/4 Chuah Sue Yin 4/4 U Chen Hock Not Applicable *

* Mr. U Chen Hock was appointed as a member of AC on 1 April 2020.

Registration No.

199801001430 (457556-X)

16






Risk Management and Compliance Committee (“RMCC”)

The composition of the RMCC as at the date of this report are as follows:

Chuah Sue Yin Chairperson, Independent Director Tan Sri Dato’ Dr Yahya Bin Awang Non-Independent Non-Executive Director Datuk Leong Kam Weng Independent Director U Chen Hock Independent Director (appointed on 1 April 2020)

The RMCC is responsible for:

(a) reviewing and recommending risk management strategies, policies, risk appetite and risk tolerance levels including the technology risk appetite for the Board’s approval;

(b) reviewing and assessing the adequacy of risk management policies and framework for identifying, measuring, monitoring and controlling risks as well as to the extent to which these are operating effectively;

(c) reviewing and overseeing the adequacy of the 3-year IT and cybersecurity strategic plans. These plans shall be periodically reviewed, at least once every three (3) years;

(d) reviewing and recommending to the Board the technology-related frameworks including technology risk management framework (TRMF) and cyber resilience framework (CRF), and ensure the risk assessments undertaken in relation to material technology projects are robust and comprehensive;

(e) reviewing reports from management on risk exposure, risk portfolio composition and risk management activities and ensure that these are within the risk appetite set by the Board;

(f) reviewing and evaluating the adequacy and effectiveness of the overall management of compliance risk on yearly basis;

(g) reviewing the management of any compliance and risk management incidents reported to and managed by the Management as well as to provide oversight on compliance reporting requirements; and

(h) ensuring that adequate infrastructure, resources and systems are in place for effective Compliance and Risk Management. This includes ensuring that the staff responsible for managing Compliance and Risk Management are duly empowered to perform their responsibilities independently.

The detailed terms of reference of the RMCC is set out in the Board Charter, which is available at the website, www.tokiomarine.com.

Registration No.

199801001430 (457556-X)

17






Risk Management and Compliance Committee (“RMCC”) (continued)

The RMCC held four (4) meetings during the financial year and the attendance of the RMCC members was as follows:

Members of the RMCC Number of meetings attended

Chuah Sue Yin 4/4 Tan Sri Dato’ Dr Yahya Bin Awang 4/4 Datuk Leong Kam Weng 4/4 U Chen Hock Not Applicable *

* Mr. U Chen Hock was appointed as a member of RMCC on 1 April 2020.

The RMCC is supported by the Company’s senior management, the Compliance Department and the Risk Management Department.

B. INTERNAL CONTROL FRAMEWORK

B1 Responsibility

The Board is responsible for the adequacy and effectiveness of the Company’s risk management and internal control framework, including policies and procedures for compliance with applicable laws, regulations, rules, directives and guidelines. The framework is established to manage rather than eliminate risks and is designed to provide reasonable assurance against any occurrence of loss or non-compliances.

At the Board level, the responsibilities for the oversight of the risk management and internal control framework have been delegated to the Board RMCC and Board AC. The responsibilities are clearly defined in the respective committees’ Terms of Reference.

B2 Authority & Responsibility

The Management Committee of the Company, led by the Chief Executive Officer, is responsible for implementation of the risk management and internal control framework. The Company has clearly defined lines of authority to supervise and monitor the business operations of the Company. Limits of authority have been established and approved by the Board. Various sub-committees have been formed to manage specific areas such as Asset & Liability Management, Claims, Underwriting, Information Technology (“IT”) and Business Continuity. Roles and responsibilities for each committee are clearly defined in the respective committees’ Terms of Reference.

Registration No.

199801001430 (457556-X)

18




B. INTERNAL CONTROL FRAMEWORK (CONTINUED)

B3 Planning, Monitoring & Reporting

The Company undergoes a strategic planning and budgeting process to establish the annual business plan and performance targets which is recommended to the Board for approval. The Management Committee is responsible for implementing strategies to achieve the targets as well as adherence to established policies and procedures. Financial and operational reports are reviewed by the Management Committee on a monthly basis to allow timely response and actions to mitigate any potential risks. Reports are tabled and presented to the Board at least quarterly highlighting the performance of the Company as well as any updates on risk management, compliance and audit matters.

B4 Policies & Procedures

Policies and procedures have been established to ensure adequacy of internal controls as well as compliance with relevant laws and regulations. These policies and procedures are reviewed periodically to ensure the documents continue to be updated and aligned with business strategies and processes. The effectiveness in implementation of the policies and procedures is regularly reviewed by the governance functions of the Company. Key policies that have been established for the purpose of governance include the Risk Management Framework and Compliance Policy.

The key policies and procedures for:

(a) Risk Management function

(i) Risk Management Framework (“RMF”); (ii) Risk Appetite Framework (“RAF”); (iii) Internet Insurance Risk Management Framework (“IIRMF”); (iv) Operational Risk Management Framework (“ORMF”); (v) Business Continuity Management related policies and procedures (“BCM Documents”);

and (vi) Technology Risk Management Framework (“TRMF”).

These frameworks/policies are reviewed annually or from time to time to ensure continued relevance and to reflect latest regulatory and group requirements.

During the financial year, the following key changes were made:

- TRMF is developed to comply with BNM policy document on Risk Management in Technology (RMiT) effective from 1 January 2020.

- For RAF, revision was made to include technology risk appetite in Risk Appetite Statement and technology risk indicators that will be covered in the new TRMF.

- For RMF, revision was made to include BNM requirements on RMiT and best practice recommended by TMHD’s Guidance for Risk Management.

The revised frameworks/policies were tabled to the Risk Management and Compliance Committee for endorsement before the Board’s approval.

Registration No.

199801001430 (457556-X)

19





B4 Policies & Procedures (continued)

The key policies and procedures for: (continued)

(b) Compliance function

(i) Compliance Policy; (ii) Anti-Money Laundering Counter Financing of Terrorism Procedural Manual; (iii) Anti-Bribery and Corruption Policy; (iv) Personal Data Protection Policy; (v) Fit & Proper Policy; (vi) Compliance and Risk Management Incidents Reporting policy; and (vii) Whistleblowing Policy

These frameworks/policies are reviewed annually or from time to time to ensure continued relevance and to reflect latest regulatory and group requirements. These will be tabled to the Risk Management and Compliance Committee for endorsement before the Board’s approval.

B5 Three Lines of Defense

In accordance with the Company’s RMF, the Company uses the three lines of defense model to ensure the effectiveness of the risk management and internal control framework. The three lines of defense model provides clarity on roles and responsibilities as well as accountability in management of risk.

Line of Defense Financial Segregation Responsibilities

First Line Risk taking units: Senior Management Business Units

Day-to-day management of risks inherent intheir business decisions and activities; and

Putting in place tools and techniques, includingmonitoring and reporting, for managing risks intheir activities.

Second Line Independent risk oversight and control units that oversee and review the first line’s activities:

Risk Management

Compliance

Risk Management:

Responsible for developing the risk management framework, setting policies and methodologies for risk management process.

Compliance:

Responsible for developing and implementingthe compliance framework, policies and methodologies for managing compliance risk.

Third Line Internal Audit Responsible for providing the Board an independent and objective assurance on the adequacy and effectiveness of governance, risk management and internal control process within the Company.

Registration No.

199801001430 (457556-X)

20





B6 Internal Audit

Internal audit is an independent, objective assurance and consulting activity designed to add value and improve the company’s operations. It helps a company accomplish its objectives by continuous reviewing and assessment of the effectiveness and adequacy of governance, risk management and internal control processes within the Company.

C. REMUNERATION POLICY

The Remuneration Policy forms a key component of the governance and incentive structure. This covers all the employees in the Company at the headquarter and branches.

The objectives of the Policy are to:

(a) serve as a guide for the performance assessment and compensation matters of the employee through which the Board ensures the remuneration is aligned with the culture, objectives and strategy of the Company; and

(b) attract, develop and retain high performing and motivated employees.

The overall Remuneration Policy for the Company is set to:

(a) be in line with the business and risk strategies, corporate values and long-term interests of the Company;

(b) promote prudent risk-taking behaviour and encourage individuals to act in the interests of the Company as a whole, taking into account the interests of its customers; and

(c) take into account any input from the control functions and the Board RMCC to ensure that risk exposures and risk outcomes are adequately considered.

At the start of the year, the Board reviews, considers and approves the Corporate Key Performance Indicators (“KPI”) and performance bonus pool for the year. The KPI is set by taking into account the business and risk strategies, long-term interest, time horizon of risks and corporate values of the Company and the performance bonus pool will depend on the actual achievement rate at the end of the financial year. The KPI set is measured by financial metrics linked to business growth, distribution strategies and value creation and non-financial metrics linked to customers’ (including employees, customers and intermediaries) engagement. In the financial year ended 31 December 2019, new metrics introduced included those linked to capital management, expense management and corporate governance.

Subsequent to the Board’s approval, the Chief Executive Officer will cascade the KPI to the direct reports; who then cascade to their respective departments. The KPI shall be set in accordance to the level of accountability, roles and responsibilities of the individual employee.

Registration No.

199801001430 (457556-X)

21




C. REMUNERATION POLICY (CONTINUED)

After the financial year ended, the Management will present the performance of the Company against the Corporate KPIs set and the resulting performance bonus pool. Performance bonus is not guaranteed and shall be subject to the performance of the Company, the department and the individual employees. If the Company’s performance metrics are weak compared to the Corporate KPIs set, the adjustments will be made accordingly to the performance bonus pool. Staff is appraised against the KPIs set for them. Performance bonus is linked to the contribution of the department and the individual staff to the overall performance of the Company.

To safeguard the independence and authority of individuals engaged in control functions, the remuneration of such individuals is based principally on the achievement of control functions objectives, and determined in a manner that is independent from the business lines. KPIs of the Appointed Actuary, the Head of Internal Audit, the Head of Risk Management and the Head of Compliance are based on the functions’ objectives.

The Company remunerates the staff in the form of cash where the components comprised of fixed salary and variable performance bonus. The variable performance bonus is not guaranteed and is subject to the performance of the Company, the department and the individual employee.

The Company continues to review its Remuneration Policy on an ongoing basis taking into consideration current market practices as well as the guidelines issued by the regulators and have introduced an additional remuneration component as follows:

Long Term Incentive (“LTI”) Plan The Long Term Incentive Plan (“LTI”) is a multi-year remuneration framework developed as contingent bonus upon meeting the performance metrics set and such reward is paid 3 years after the assessment period. By aligning key executives’ interest with the long term value creation within the risk appetite and the deferment of LTI payment, the LTI Plan would fulfil the regulatory requirement on the adoption of a multi-year remuneration framework for senior management and other material risk takers. In addition, LTI Plan is an effective way to reward, motivate and retain talents who have contributed to the long term value creation of the Company.

As of 31 December 2019, the Company has seventeen (17) (2018: 17) senior management members comprising of Chief Executive Officer and his direct reports. Other material risk takers identified by the Company comprises of the Head of Fixed Income and Head of Equity. The quantitative remuneration disclosure for the senior management members for the financial year ended 31 December 2019 is shown in the table below. All the senior management members received variable remuneration for the financial year; none of the members receive any guaranteed bonus, severance payments or sign-on award during the financial year.

Registration No.

199801001430 (457556-X)

22




C. REMUNERATION POLICY (CONTINUED)

Total value of remuneration awards for the financial year 2019 (RM)

Unrestricted Deferred

Fixed remuneration

Cash-based 9,783,705 -

Shares and share-linked instruments - -

Other - -

Variable remuneration



Other - -

Total value of remuneration awards for the financial year 2018 (RM)

Unrestricted Deferred

Fixed remuneration



Other - -

Variable remuneration



Other - -

The quantitative remuneration disclosure for the Chief Executive Officer is disclosed in Note 21(a) to the financial statements.

FINANCIAL REPORTING

The Board has the overall responsibilities to ensure that accounting records are properly kept and that the Company’s financial statements are prepared in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The Company meets all prescriptive requirements under this section relating to proper records, annual reports, public disclosure and statutory reporting.

Registration No.

199801001430 (457556-X)

23



SUBSIDIARIES

The Company does not have any subsidiaries.

DIRECTORS’ INTERESTS IN SHARES

According to the Register of Directors’ Shareholdings required to be kept under Section 59 of the Companies Act 2016, none of the Directors who held office at the end of the financial year held any shares or debentures in the Company or its holding company or subsidiaries of the holding company during the financial year.

DIRECTORS’ BENEFITS

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no Director of the Company has received or become entitled to receive any benefit (other than Directors’ remuneration disclosed in Note 21 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

DIRECTORS’ REMUNERATION

The Directors’ remuneration is disclosed in Notes 21 and 27(c) to the financial statements.

INDEMNITY TO DIRECTORS AND OFFICERS

During the financial year, the total amount of indemnity coverage and insurance premium paid for the Directors and certain officers of the Company were RM10,000,000 and RM18,000 respectively.

IMMEDIATE AND ULTIMATE HOLDING CORPORATION

The Directors regard Tokio Marine Life Insurance Singapore Ltd., a company incorporated in Singapore, as the Company’s immediate holding company and Tokio Marine Holdings, Inc., a company incorporated in Japan, as the ultimate holding company.

SUBSEQUENT EVENTS

Subsequent events are disclosed in Note 36 to the financial statements.

AUDITORS’ REMUNERATION

Details of auditors’ remuneration are disclosed in Note 21 to the financial statements. There is no indemnity given or insurance effected for any auditor of the Company.

Registration No.

199801001430 (457556-X)

24



AUDITORS

The auditors, PricewaterhouseCoopers PLT (LLP0014401-LCA & AF 1146), have expressed their willingness to continue in office.

This report was approved by the Board of Directors on 6 May 2020. Signed on behalf of the Board of Directors:

DATUK LEONG KAM WENG CHUAH SUE YIN DIRECTOR DIRECTOR

Registration No.

199801001430 (457556-X)

25


STATEMENT BY DIRECTORS PURSUANT TO SECTION 251(2) OF THE COMPANIES ACT 2016

We, Datuk Leong Kam Weng and Chuah Sue Yin, two of the Directors of Tokio Marine Life Insurance Malaysia Bhd., state that, in the opinion of the Directors, the financial statements set out on pages 30 to 122 are drawn up so as to give a true and fair view of the financial position of the Company as at 31 December 2019 and financial performance and the cash flow of the Company for the financial year ended 31 December 2019 in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

Signed on behalf of the Board of Directors in accordance with their resolution dated 6 May 2020.

DATUK LEONG KAM WENG CHUAH SUE YIN DIRECTOR DIRECTOR

STATUTORY DECLARATION PURSUANT TO SECTION 251(1)(b) OF THE COMPANIES ACT 2016

I, Toi See Jong, the officer primarily responsible for the financial management of Tokio Marine Life Insurance Malaysia Bhd., do solemnly and sincerely declare that the financial statements set out on pages 30 to 122 are, in my opinion, correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

TOI SEE JONG

Subscribed and solemnly declared by the abovenamed Toi See Jong at Kuala Lumpur in Malaysia on 6 May 2020.

Before me:

COMMISSIONER FOR OATH

INDEPENDENT AUDITORS' REPORT TO THE MEMBER OF TOKIO MARINE LIFE INSURANCE MALAYSIA BHD. (Incorporated in Malaysia) (Company No. 199801001430 (457556-X))

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

PricewaterhouseCoopers PLT (LLP0014401-LCA & AF 1146), Chartered Accountants, Level 10, 1 Sentral, Jalan Rakyat, Kuala Lumpur Sentral, P.O. Box 10192, 50706 Kuala Lumpur, Malaysia T: +60 (3) 2173 1188, F: +60 (3) 2173 1288, www.pwc.com/my

26

Our opinion

In our opinion, the financial statements of Tokio Marine Life Insurance Malaysia Bhd. (“the Company”) give a true and fair view of the financial position of the Company as at 31 December 2019, and of its financial performance and its cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia.

What we have audited

We have audited the financial statements of the Company, which comprise the statement of financial position as at 31 December 2019, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the financial year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 30 to 122.

Basis for opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing. Our responsibilities under those standards are further described in the “Auditors’ responsibilities for the audit of the financial statements” section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence and other ethical responsibilities

We are independent of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Information other than the financial statements and auditors’ report thereon

The Directors of the Company are responsible for the other information. The other information comprises the Directors' Report, but does not include the financial statements of the Company and our auditors’ report thereon.

INDEPENDENT AUDITORS' REPORT TO THE MEMBER OF TOKIO MARINE LIFE INSURANCE MALAYSIA BHD. (CONTINUED) (Incorporated in Malaysia) (Company No. 199801001430 (457556-X))

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED)

27

Our opinion on the financial statements of the Company does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Company, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements of the Company or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the financial statements

The Directors of the Company are responsible for the preparation of the financial statements of the Company that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements of the Company that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements of the Company, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Company as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:



28

(a) Identify and assess the risks of material misstatement of the financial statements of the Company, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

(b) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

(c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.

(d) Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Company to cease to continue as a going concern.

(e) Evaluate the overall presentation, structure and content of the financial statements of the Company, including the disclosures, and whether the financial statements of the Company represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.



29

OTHER MATTERS

This report is made solely to the member of the Company, as a body, in accordance with Section 266 of the Companies Act 2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

PRICEWATERHOUSECOOPERS PLT SOO HOO KHOON YEAN LLP0014401-LCA & AF 1146 02682/10/2021 J Chartered Accountants Chartered Accountant

Kuala Lumpur 6 May 2020

Registration No.

199801001430 (457556-X)

30


STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2019

Note 2019 2018 RM’000 RM’000

ASSETS

Property, plant and equipment 3 175,480 174,798 Right-of-use assets 508 - Investment properties 4 168,104 159,095 Intangible assets 5 11,855 39,522 Financial investments Available-for-sale (“AFS”) financial assets 6a 5,759,386 5,352,099 Fair value through profit or loss (“FVTPL”) financial assets 6b 1,096,138 860,571 Held-to-maturity (“HTM”) financial assets 6c 963,724 985,000 Loans and receivables (“LAR”) 6d 461,177 484,335 Insurance receivables 7 29,590 56,404 Other receivables 8 35,281 17,639 Cash and cash equivalents 354,463 512,104

──────── ────────

TOTAL ASSETS 9,055,706 8,641,567 ════════ ════════

EQUITY, POLICYHOLDERS’ FUNDS AND LIABILITIES

Share capital 9 226,000 226,000 Retained earnings 10 652,479 668,902 Available-for-sale reserve 67,108 13,098 Asset revaluation reserve 3,208 3,029

──────── ────────

TOTAL EQUITY 948,795 911,029 ──────── ────────

Insurance contract liabilities 11 7,258,035 6,925,261 Insurance payables 12 522,603 508,263 Lease liabilities 543 - Other payables 13 64,248 62,906 Provision for agency long association benefits 14 31,378 29,480 Current tax liabilities 14,017 8,347 Deferred tax liabilities 15 216,087 196,281

──────── ────────

TOTAL POLICYHOLDERS’ FUNDS AND LIABILITIES 8,106,911 7,730,538 ──────── ────────

TOTAL EQUITY, POLICYHOLDERS’ FUNDS AND LIABILITIES 9,055,706 8,641,567

════════ ════════

The accompanying notes form an integral part of these financial statements.

Registration No.

199801001430 (457556-X)

31


STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019

Note 2019 2018 RM’000 RM’000

Gross earned premium revenue 1,321,334 1,311,098 Premiums ceded to reinsurers (44,485) (39,425)

──────── ────────

Net earned revenue 1,276,849 1,271,673 ──────── ────────

Investment income 16 350,022 348,072 Net realised gains/(losses) 17 149,841 (2,207) Net fair value gains/(losses) 18 69,630 (73,862) Commission income 19 3,445 5,152

──────── ────────

Other income 572,938 277,155 ──────── ────────

Gross benefits and claims paid (1,149,889) (1,000,472) Claims ceded to reinsurers 31,188 38,021 Gross change to insurance contract liabilities (330,608) (120,587)

──────── ────────

Net insurance benefits and claims (1,449,309) (1,083,038) ──────── ────────

Commission and agency expenses (146,873) (133,023) Management expenses 21 (181,032) (178,101) Other operating (expenses)/income– net 20 (1,250) 1,995

──────── ────────

Other expenses (329,155) (309,129) ──────── ────────

Profit before taxation 71,323 156,661

Taxation 22 (51,046) (48,568) ──────── ────────

Net profit for the financial year 20,277 108,093 ════════ ════════


Registration No.

199801001430 (457556-X)

32


STATEMENT OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED)

Note 2019 2018 RM’000 RM’000 Other comprehensive income/(loss): Items that will be reclassified subsequently to profit or loss Fair value change on available-for-sale financial assets: Net gains/(losses) arising during the financial year 159,055 (136,550) Realised gains transferred to profit or loss (137,535) (95,718) Impairment losses transferred to profit or loss 11,966 65,556 Tax effects thereon (16,093) 10,341 ──────── ────────

Fair value gains/(losses), net of tax 17,393 (156,371) Change in insurance contract liabilities arising from net fair value losses 11 36,617 155,687 ──────── ────────

Net fair value change 54,010 (684) ──────── ────────

Items that will not be reclassified subsequently to profit or loss Asset revaluation reserve: Gross asset revaluation surplus 3 2,957 6,979 Tax effects thereon (282) (1,315) ──────── ────────

Asset revaluation surplus, net of tax 2,675 5,664 Change in insurance contract liabilities arising from net asset revaluation surplus 11 (2,496) (5,931) ──────── ────────

Net asset revaluation surplus/(deficit) 179 (267) ──────── ────────

Total other comprehensive income/(loss) 54,189 (951) ──────── ────────

Total comprehensive income for the financial year 74,466 107,142 ════════ ════════

Basic earnings per share (sen) 23 8.97 47.83 ════════ ════════


Registration No.

199801001430 (457556-X)

33


STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019

Non-Distributable Distributable Available Asset Share -for-sale revaluation Retained capital reserve reserve earnings* Total RM’000 RM’000 RM’000 RM’000 RM’000 Issued and fully paid ordinary shares: At 1 January 2018 226,000 13,782 3,296 570,809 813,887 Total comprehensive (loss)/income for the financial year - (684) (267) 108,093 107,142 Dividend paid 24 - - - (10,000) (10,000) ──────── ──────── ──────── ──────── ────────

At 31 December 2018 226,000 13,098 3,029 668,902 911,029 ════════ ════════ ════════ ════════ ════════

Issued and fully paid ordinary shares: At 1 January 2019 226,000 13,098 3,029 668,902 911,029 Total comprehensive income for the financial year - 54,010 179 20,277 74,466 Dividend paid 24 - - - (36,700) (36,700) ──────── ──────── ──────── ──────── ────────

At 31 December 2019 226,000 67,108 3,208 652,479 948,795 ════════ ════════ ════════ ════════ ════════

* Included in the retained earnings as at 31 December 2019 is unallocated surplus in the non-discretionary participation features (“non-DPF”) fund (net of deferred

tax) of RM635,257,000 (2018: RM604,901,000). These amounts are only distributable upon the actual recommended transfer from non-DPF fund to the Shareholders’ Fund by the Appointed Actuary.


Registration No.

199801001430 (457556-X)

34


STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 2019 2018 RM’000 RM’000 CASH FLOWS FROM OPERATING ACTIVITIES Net profit for the financial year 20,277 108,093 Adjustments: Investment income (350,022) (348,072) Interest expense for lease liabilities 58 - Realised gains of AFS financial assets (161,799) (63,257) Fair value (gains)/losses of FVTPL financial assets (60,718) 84,477 Fair value gains of investment properties (8,934) (10,640) Loss on early redemption of HTM financial assets 22 25 Depreciation of property, plant and equipment 5,841 5,929 Depreciation of right-of-use assets 663 - Write-offs of property, plant and equipment 40 98 Gain on disposal of property, plant and equipment (8) (92) Amortisation of intangible assets 32,237 32,067 Impairment of AFS financial assets 11,966 65,556 Write-back of impairment of insurance receivables (206) (1,076) (Write-back of impairment)/impairment loss of loan receivables (20) 305 Impairment loss/(write-back of impairment) of other receivables 1,686 (1,482) Write-offs/(recovery of write-offs) of insurance receivables 175 (3) Provision for agency long association benefits 6,074 5,662 Taxation 51,046 48,568 Changes in working capital: Purchases of financial assets (2,539,934) (1,327,177) Proceeds from maturity and disposal of financial assets 2,149,977 1,148,459 Decrease/(increase) in loans 23,178 (7,393) Decrease/(increase) in insurance receivables 26,845 (24,076) Decrease in other receivables 4,499 9,076 Increase in insurance contract liabilities 366,895 166,720 Increase in insurance payables 14,340 33,495 Decrease in other payables (15,375) (10,634) ──────── ────────

(421,197) (85,372) Dividend income received 63,917 64,703 Interest income received 287,993 280,014 Rental income received 3,399 1,003 Agency long association benefits paid (4,176) (4,711) Income tax paid (41,947) (27,333) ──────── ────────

Net cash (outflows)/inflows from operating activities (112,011) 228,304 ──────── ────────

Registration No.

199801001430 (457556-X)

35


STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2019 (CONTINUED) Note 2019 2018 RM’000 RM’000 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (3,805) (6,392) Proceeds from disposal of property, plant and equipment 8 93 Purchase of intangible assets (4,446) (2,155) ──────── ────────

Net cash outflows from investing activities (8,243) (8,454) ──────── ────────

CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid 24 (36,700) (10,000) Payment to lease liabilities (687) - ──────── ────────

Net cash outflows from financing activities (37,387) (10,000) ──────── ────────

Net (decrease)/increase in cash and cash equivalents (157,641) 209,850 Cash and cash equivalents at 1 January 512,104 302,254 ──────── ────────

Cash and cash equivalents at 31 December 354,463 512,104 ════════ ════════

Cash and cash equivalents comprise: Cash and bank balances 44,700 36,619 Fixed and call deposits with maturity of less than three months 309,763 475,485 ──────── ────────

354,463 512,104 ════════ ════════


Registration No.

199801001430 (457556-X)

36


NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019

1 PRINCIPAL ACTIVITIES AND GENERAL INFORMATION The Company is principally engaged in the underwriting of all classes of life insurance business,

including investment-linked business. There were no significant change in the nature of this activity during the financial years relevant to these financial statements.

The Company is a public limited liability company, incorporated and domiciled in Malaysia. The

registered office of the Company is located at Level 23, Menara Tokio Marine Life, 189, Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia. The principal place of business of the Company is located at Ground Floor, Menara Tokio Marine Life, 189 Jalan Tun Razak, 50400 Kuala Lumpur, Malaysia.

The Directors regard Tokio Marine Life Insurance Singapore Ltd., a company incorporated in

Singapore, as the Company’s immediate holding company and Tokio Marine Holdings, Inc., a company incorporated in Japan, as the ultimate holding company.

2 SIGNIFICANT ACCOUNTING POLICIES The following accounting policies have been used consistently in dealing with items which are

considered material in relation to the financial statements. 2.1 Basis of Preparation The financial statements of the Company have been prepared in accordance with Malaysian Financial

Reporting Standards (“MFRS”) and International Financial Reporting Standards (“IFRS”). Insurance liabilities have been computed in accordance with the valuation methods specified in the

RBC Framework issued by BNM. The Company has met the minimum capital requirements as prescribed by the RBC Framework as at the date of the statement of financial position.

The preparation of financial statements in conformity with MFRS requires the Directors to exercise

their judgement in the process of applying the Company’s accounting policies. It also requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported financial year. Although these estimates are based on the Directors’ best knowledge of current events and actions, actual results could differ from those estimates. Critical accounting estimates and assumptions used that are significant to the financial statements, and areas involving a higher degree of judgement or complexity, are disclosed in Note 2.3 to the financial statements.

The financial statements are presented in Ringgit Malaysia (“RM”) and all values are rounded to the

nearest thousand (“RM’000”) except when otherwise indicated.

Registration No.

199801001430 (457556-X)

37


NOTES TO THE FINANCIAL STATEMENTS - 31 DECEMBER 2019 (CONTINUED)

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

2.2 Summary of Significant Accounting Policies

(a) Property, plant and equipment Property, plant and equipment are initially stated at cost. Land and buildings are subsequently

shown at fair value less accumulated depreciation and impairment losses. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the assets, and the net amount is restated to the revalued amount of the asset. All other property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

The cost of an item of property, plant and equipment initially recognised includes its purchase price, import duties, non-refundable purchase taxes and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate

asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the financial year in which they are incurred.

Surpluses arising on revaluation are credited to revaluation reserve. Any deficit arising from

revaluation is charged against the revaluation reserve to the extent of a previous surplus held in the revaluation reserve for the same asset. In all other cases, a decrease in carrying amount is charged to profit or loss.

Freehold land is not depreciated as it has an infinite life. Depreciation is provided so as to

write off the cost of other property, plant and equipment on a straight line basis to allocate their cost to their residual values over the expected useful lives of the assets. The expected useful lives of the assets are summarised as follows:

Motor vehicles 5 years Office equipment, furniture and fittings 10 years Computer equipment 4 years Renovation 10 years Leasehold land Lease period ranging from 51 to 913 years Leasehold buildings Lease period subject to a maximum of 50 years Freehold buildings 50 years

At each date of the statement of financial position, the Company assesses whether there is any indication of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount. See accounting policy Note 2.2(d) on impairment of non-financial assets.

Gains and losses on disposals are determined by comparing proceeds with carrying amounts

and are credited or charged to profit or loss. On disposal of revalued assets, amounts in revaluation reserve relating to those assets are transferred to retained earnings.

Registration No.

199801001430 (457556-X)

38



2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Summary of Significant Accounting Policies (continued)

(b) Investment properties Investment properties, comprising principally land and buildings, are held for long-term rental

yields or for capital appreciation or both, and are not occupied by the Company. Investment properties are initially stated at cost including related and incidental expenditure

incurred, and are subsequently carried at fair value, representing open market value determined by independent professional valuers. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. The fair values of investment properties are reviewed annually by an independent professional valuer. Valuations are performed as of the financial position date by professional valuers who hold recognised and relevant professional qualifications and have recent experience in the location and category of the investment property being valued. Changes in fair values are recognised in profit or loss.

On disposal of an investment property, or when it is permanently withdrawn from use and no

future economic benefits are expected from its disposal, it shall be derecognised (eliminated from the statement of financial position). The difference between the net disposal proceeds and the carrying amount is recognised in profit or loss in the financial year of the retirement or disposal.

(c) Intangible assets All intangible assets are stated at cost less accumulated amostisation and impairment losses.

(i) Computer software

Where computer software is not an integral part of a related item of computer hardware, the software is treated as an intangible asset. Capitalised internal-use software costs include external direct costs of materials and services consumed in developing or obtaining the software, payroll and payroll-related costs for employees who are directly associated with and who devote substantial time to the project. Capitalisation of these costs ceases no later than the point at which the project is substantially completed and ready for its intended purpose. These costs are amortised over their expected useful life of 4 years on a straight-line basis, with the useful lives being reviewed annually.

Registration No.

199801001430 (457556-X)

39




(c) Intangible assets (continued)

(i) Computer software (continued)

Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Company are recognised as intangible assets when the following criteria are met:

- it is technically feasible to complete the software product so that it will be available

for use; - management intends to complete the software product and use or sell it; - there is an ability to use or sell the software product; - it can be demonstrated how the software product will generate probable future

economic benefits; - adequate technical, financial and other resources to complete the development and

to use or sell the software product are available; and - the expenditure attributable to the software product during its development can be

reliably measured.

The assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. See accounting policy Note 2.2(d) on impairment of non-financial assets.

(ii) Exclusive bancassurance agreement

The exclusive bancassurance agreement provides the Company with an exclusive right to the use of the bancassurance network of a bank. The fee for this right is amortised over its useful life of 5 years using the straight line method. The asset is reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. See accounting policy Note 2.2(d) on impairment of non-financial assets.

Registration No.

199801001430 (457556-X)

40




(d) Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested

annually for impairment. Assets that are subject to amortisation are reviewed for impairment losses, whenever events

or changes in circumstances indicate that the carrying amount may be impaired. An impairment loss is recognised for the amount by which the carrying value of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and the value in use. Recoverable amount is estimated for an individual asset, or, if it is not possible, for the cash-generating unit. Assets that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

An impairment loss is charged to profit or loss immediately. A subsequent increase in the recoverable amount of an asset is treated as reversal of the

previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in profit or loss immediately.

(e) Financial investments The Company classifies its investments into financial assets at FVTPL, HTM financial assets,

LAR and AFS financial assets. The classification depends on the purpose for which the investments were acquired or

originated. Management determines the classification of its investments at initial recognition. All regular way purchases and sales of financial assets are recognised on the trade date

which is the date that the Company commits to purchase or sell the asset. Regular way purchases or sales of financial assets require delivery of assets within the period generally established by regulation or convention in the market place.

Registration No.

199801001430 (457556-X)

41



2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Summary of Significant Accounting Policies (continued) (e) Financial investments (continued)

(i) Financial assets at FVTPL

Financial assets at FVTPL include held-for-trading (“HFT”) financial assets and those designated at FVTPL at inception. Investments typically bought with the intention to sell in the near future are classified as HFT. For investments designated at FVTPL, the following criteria must be met:

- the designation eliminates or significantly reduces the inconsistent treatment that

would otherwise arise from measuring the assets or liabilities or recognising gains or losses on a different basis, or

- the assets and liabilities are part of a group of financial assets, financial liabilities or both which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management or investment strategy.

These investments are initially recorded at fair value. Subsequent to initial recognition, these investments are remeasured at fair value. Fair value adjustments and realised gains and losses are recognised in profit or loss.

(ii) HTM financial assets Non-derivative financial assets with fixed or determinable payments and fixed maturities

are classified as HTM when the Company has the positive intention and ability to hold until maturity. These investments are initially recognised at fair value. After initial measurement, HTM financial assets are measured at amortised cost, using the effective yield method, less impairment losses. Gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process.

(iii) LAR LAR are non-derivative financial assets with fixed or determinable payments that are not

quoted in an active market. These investments are initially recognised at fair value. After initial measurement, LAR are measured at amortised cost, using the effective yield method, less impairment losses. Gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process.

Registration No.

199801001430 (457556-X)

42




(e) Financial investments (continued)

(iv) AFS financial assets AFS financial assets are non-derivative financial assets that are designated as available-

for-sale or are not classified in any of the three preceding categories. These investments are initially recorded at fair value. After initial measurement, AFS financial assets are remeasured at fair value.

Fair value gains and losses of monetary and non-monetary securities are reported as a

separate component of equity until the investment is derecognised or investment is determined to be impaired. Fair value gains and losses of monetary securities denominated in a foreign currency are analysed between translation differences resulting from changes in amortised cost of the security and other changes in the carrying amount of the security. The translation differences on monetary securities are recognised in profit or loss; translation differences on non-monetary securities are reported as a separate component of equity until the investment is derecognised.

On derecognition or impairment, the cumulative fair value gains and losses previously

reported in equity is transferred to profit or loss.

(f) Fair value of financial instruments A financial instrument is any contract that gives rise to both a financial asset of one enterprise

and a financial liability or equity instrument of another enterprise. A financial asset is any asset that is cash, a contractual right to receive cash or another

financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise.

A financial liability is any liability that is a contractual obligation to deliver cash or another

financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable.

The fair value of financial instruments that are actively traded in organised financial markets

is determined by reference to quoted market bid prices for assets and offer prices for liabilities, at the close of business on the date of the statement of financial position.

For investments in unit and real estate investment trusts, fair value is determined by reference

to published bid values.

Registration No.

199801001430 (457556-X)

43




(f) Fair value of financial instruments (continued)

For financial instruments where there is not an active market, the fair value is determined by using valuation techniques. Such techniques include using recent arm’s length transactions, reference to the current market value of another instrument which is substantially the same, discounted cash flow analysis and/or option pricing models making maximum use of market inputs and relying as little as possible on entity-specific inputs. For discounted cash flow techniques, estimated future cash flows are based on management’s best estimates and the discount rate used is a market related rate for a similar instrument. Certain financial instruments are valued using pricing models that consider, among other factors, contractual and market prices, co-relation, time value of money, credit risk, yield curve volatility factors and/or prepayment rates of the underlying positions. The use of different pricing models and assumptions could produce materially different estimates of fair values. The fair value of floating rate and over-night deposits with financial institutions is their carrying value. The carrying value is the cost of the deposit/placement and accrued interest/profit. The fair value of fixed interest/yield-bearing deposits is estimated using discounted cash flow techniques. Expected cash flows are discounted at current market rates for similar instruments at the date of the statement of financial position. If investment in equity instruments do not have a quoted market price in an active market and whose fair value cannot be measured reliably, these financial instruments are measured at cost, being the fair value of the consideration paid for the acquisition of the instrument or the amount received on issuing the financial liability. All transaction costs directly attributable to the acquisition of financial assets are also included in the cost of the financial assets except for FVTPL financial assets, where the transaction cost are expensed in profit or loss as they are incurred. The carrying values of financial assets and financial liabilities with maturity period of less than one year are assumed to approximate their fair values.

(g) Offsetting of financial assets and financial liabilities

Financial assets and financial liabilities are offset and the net amount reported in the

statement of financial position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liability simultaneously. Income and expense will not be offset in profit or loss unless required or permitted by any accounting standard or interpretation, as specifically disclosed in the accounting policies of the Company.

As at 31 December 2019, the Company does not offset its financial assets with financial

liabilities.

Registration No.

199801001430 (457556-X)

44



2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Summary of Significant Accounting Policies (continued) (h) Impairment of financial instruments

The Company assesses at each date of the statement of financial position whether there is objective evidence that a security is impaired. A security is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the security that can be reliably estimated.

(i) Financial assets carried at amortised cost

If there is objective evidence that an impairment loss on assets carried at amortised cost has been incurred, the amount of the impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate/yield. The carrying amount of the asset is reduced and the loss is recorded in profit or loss. The Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment. The impairment assessment is performed at each date of the statement of the financial position.

If, in a subsequent period, the amount of the impairment loss decreases and the

decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

(ii) Financial assets carried at fair value

If an AFS financial asset is impaired, an amount comprising the difference between its cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from other comprehensive income to profit or loss. Reversals in respect of equity instruments classified as AFS are not recognised in profit or loss. Reversals of impairment losses on debt instruments classified as AFS are reversed through profit or loss if the increase in the fair value of the instruments can be objectively related to an event occurring after the impairment losses were recognised in profit or loss.

Registration No.

199801001430 (457556-X)

45




(i) Derecognition of financial assets Financial assets are derecognised when the rights to receive cash flows from them have

expired or where they have been transferred and the Company has also transferred substantially all risks and rewards of ownership.

(j) Insurance contracts

The Company issues contracts that transfer mainly insurance risk.

Insurance risk is the risk other than financial risk. Financial risk is the risk of a possible future change in one or more of a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of price or rate, credit rating or credit index or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract. Insurance contracts are those contracts that transfer significant insurance risk. An insurance contract is a contract under which the Company (the insurer) has accepted significant insurance risk from another party (the policyholders) by agreeing to compensate the policyholders if a specified uncertain future event (the insured event) adversely affects the policyholders. Such contracts may also transfer financial risk. As a general guideline, the Company determines whether it has significant insurance risk, by comparing benefits paid with benefits payable if the insured event did not occur.

Investment contracts are those contracts that do not transfer significant insurance risk.

Currently, the Company does not issue any investment contracts.

Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder of its life-time, even if the insurance risk reduces significantly during this period, unless all rights and obligations are extinguished or expired. Insurance contracts are further classified as being either with or without discretionary participation features (“DPF”). DPF is a contractual right to receive, as a supplement to guaranteed benefits, additional benefits that are: (i) likely to be a significant portion of the total contractual benefits; (ii) whose amount or timing is contractually at the discretion of the issuer; and (iii) that are contractually based on the:

- performance of a specified pool of contracts or a specified type of contract; - realised and/or unrealised investment returns on a specified pool of assets held by

the issuer; or - the profit or loss of the Company, fund or other entity that issues the contract.

Registration No.

199801001430 (457556-X)

46



2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Summary of Significant Accounting Policies (continued) (j) Insurance contracts (continued)

Local statutory regulations and the terms and conditions of these contracts set out the bases

for the determination of the amounts on which the additional discretionary benefits are based (the DPF surplus) and within which the Company may exercise its discretion as to the quantum and timing of their payment to contract holders. At least 90% of the surplus must be attributed to the contract holders as a group (which can include future contract holders), while the amount and timing of the distribution to individual contract holders is at the discretion of the Company, approved by the Board of Directors based on the advice of the Appointed Actuary.

The recognition and measurement of the insurance contracts are set out in Note 2.2(l) and

Note 2.2(n). (k) Reinsurance

Contracts entered into by the Company with reinsurers under which the Company is compensated for losses on one or more contracts issued by the Company and that meet the classification requirements for insurance contracts in Note 2.2(j) to the financial statements are classified as ceded reinsurance contracts. Premium ceded and claims reimbursed are recognised in the same accounting period as the original policies to which the reinsurance relates. The benefits to which the Company is entitled under its reinsurance contracts are recognised as reinsurance assets. Amounts recoverable from reinsurers are estimated in a manner consistent with the outstanding claims provision or settled claims associated with the reinsurer’s policies and are in accordance with the related reinsurance contracts.

Ceded reinsurance arrangements do not relieve the Company from its obligations to policyholders. Premiums and claims are presented on a gross basis for both ceded and assumed reinsurance. Reinsurance assets are reviewed for impairment at each reporting date or more frequently when an indication of impairment arises during the reporting period. An allowance for impairment loss is established using the same method used for all financial assets carried at amortised cost. These processes are described in Note 2.2(h) to the financial statements. Reinsurance assets or liabilities are derecognised when the contractual rights are extinguished or expired or when the contract is transferred to another party.

Registration No.

199801001430 (457556-X)

47




(l) Life insurance contracts Premiums Premium income is recognised as soon as the amount of the premium can be reliably

measured. First premium is recognised from inception date and subsequent premium is recognised when it is due.

At the end of the financial year, all due premiums are accounted for to the extent that they

can be reliably measured. Premium income of the investment-linked funds is in respect of the net creation of units which

represents premiums paid by policyholders as payment for a new contract or subsequent payments to increase the amount of that contract. Net creation of units is recognised on a receipt basis.

Reinsurance premiums

Gross reinsurance premiums are recognised as an expense when payable or on the date

which the policy is effective.

Commission and agency expenses Gross commission and agency expenses, which are costs directly incurred in securing

premium on insurance policies are charged to the income statements in the financial year in which they are incurred.

Benefits, claims and expenses

Benefits and claims that are incurred during the financial year are recognised when a claimable event occurs and/or the insurer is notified. Benefits and claims arising on life insurance policies including settlement costs, less reinsurance recoveries, are accounted for using the case basis method and for this purpose, the benefits payable under a life insurance policy are recognised as follows:

(i) maturity or other policy benefit payments due on specified dates are treated as claims

payable on the due dates; (ii) death, surrender and other benefits without due dates are treated as claims payable, on

the date of receipt of intimation of death of the assured or occurrence of contingency covered;

(iii) benefits payable under investment-linked contract include net cancellation of units and

are recognised as surrender; and (iv) bonus on DPF policy upon its declaration.

Registration No.

199801001430 (457556-X)

48




(l) Life insurance contracts (continued)

Insurance fund

The surplus transferable from the life fund to the shareholders’ fund is based on the surplus determined by an annual actuarial valuation of the long term liabilities to policyholders. In the event the actuarial valuation indicates that a transfer is required from the shareholders' fund, the transfer from the shareholders’ fund to the life insurance fund is made in the financial year of the actuarial valuation.

(m) Insurance receivables

Insurance receivables are recognised when due and measured on initial recognition at fair value. Subsequent to initial recognition, insurance receivables are measured at amortised cost, using the effective yield method.

If there is objective evidence that the insurance receivable is impaired, the Company reduces the carrying amount of the insurance receivable accordingly and recognises that impairment loss in profit or loss. The Company gathers the objective evidence that an insurance receivable is impaired using the same process adopted for financial assets carried at amortised cost. The impairment loss is calculated under the same method used for these financial assets. These processes are described in Note 2.2(h) to the financial statements.

Insurance receivables are derecognised when the derecognition criteria for financial assets, as described in Note 2.2(i) to the financial statements, have been met.

(n) Life insurance contract liabilities

Life insurance contract liabilities are recognised when contracts are entered into and premiums are charged. Life insurance contract liabilities comprise (i) provision for outstanding claims, (ii) actuarial liabilities, (iii) unallocated surplus, (iv) AFS fair value adjustment, (v) asset revaluation surplus adjustment and (vi) net asset value attributable to unitholders. (i) Provision for outstanding claims

Provision for outstanding claims represent the amounts payable under a life insurance policy in respect of claims including settlement costs, are accounted for using the case-by-case method as set out above under benefits, claims and expenses.

Registration No.

199801001430 (457556-X)

49




(n) Life insurance contract liabilities (continued)

(ii) Actuarial liabilities

These liabilities are measured by using a prospective actuarial valuation method. The liability is determined as the sum of the present value of future guaranteed and, in the case of a participating life policy, appropriate level of non-guaranteed benefits, and the expected future management and distribution expenses, less the present value of future gross considerations arising from the policy discounted at the appropriate risk discount rate. The liability is based on best estimate assumptions and with due regard to significant recent experience. An appropriate allowance for provision of risk margin for adverse deviation from expected experience is made in the valuation of non-participating life policies, the guaranteed benefits liabilities of participating life policies, and non-unit liabilities of investment-linked policies. The valuation basis, including the determination of the appropriate risk discount rate, is in accordance with Appendix VII: Valuation Basis for Life Insurance Liabilities of the RBC Framework, and any related circulars issued by BNM relevant to the guidelines. The reinsurance recoverable of the liabilities is insignificant and hence is not accounted for in the measurement of the liabilities.

The liability in respect of policies of a participating insurance fund shall be taken as the higher of the guaranteed benefits liabilities or the total benefits liabilities at the fund level (derived in the method as stated in the above paragraph) as stipulated under paragraph 3.2, Appendix VII of the RBC Framework.

In the case of a life policy where a part of, or the whole of the premiums are accumulated in a fund, the accumulated amount, as declared to the policy owners, are set as the liabilities if the accumulated amount is higher than the figure as calculated using the prospective actuarial valuation method. Where policies or extensions of a policy are collectively treated as an asset at the fund level under the valuation method adopted, the value of such asset is eliminated through zerorisation.

In the case of a 1-year life policy or a 1-year extension to a life policy covering contingencies other than death or survival, the liability for such life insurance contracts comprises the provision for unearned premiums and unexpired risks, as well as for claims outstanding, which includes an estimate of the incurred claims that have not yet been reported to the Company.

Registration No.

199801001430 (457556-X)

50





(ii) Actuarial liabilities (continued)

Adjustments to the liabilities at each reporting date are recorded in profit or loss. Profits originated from margins of adverse deviations on run-off contracts, are recognised in profit or loss over the life of the contract, whereas losses are fully recognised in profit or loss during the first year of run-off. The liability is derecognised when the contract expires, is discharged or is cancelled. At each reporting date, an assessment is made of whether the recognised actuarial liabilities are adequate, by using an existing liability adequacy test based on the RBC Framework.

(iii) Unallocated surplus

Surpluses in the DPF are distributable to policyholders and shareholders in accordance with the relevant terms under the insurance contracts. The Company, however, has the discretion over the amount and timing of the distribution of these surpluses to policyholders and shareholders. Unallocated surpluses of the DPF where the amount of surplus allocation to either policyholders or shareholders has yet to be determined by the end of the financial year is held within insurance contract liabilities.

(iv) AFS fair value adjustment

Where unrealised fair value gains and losses arise on AFS financial assets of the DPF fund, the adjustment to the life insurance contract liabilities equal to the effect that the realisation of those gains or losses at the end of the reporting period would have on those liabilities is recognised directly in other comprehensive income.

(v) Asset revaluation surplus adjustment

Where asset revaluation surplus arises on the self-occupied properties of the DPF fund, the adjustment to the life insurance contract liabilities equal to the effect that the realisation of those surpluses at the end of the reporting period would have on those liabilities is recognised directly in other comprehensive income. The surpluses arising from the revaluation of the DPF’s assets may be distributed by way of bonuses to life policyholders, subject to the limit that the amount distributed should not be more than 30% of the addition to revaluation surplus of 10% of the market value of the revalued property, whichever is lower.

Registration No.

199801001430 (457556-X)

51





(vi) Net asset value attributable to unitholders

The unit liability of investment-link contract is equal to the net asset value of the investment-linked funds, which represents net premium received and investment returns credited to the policy less deduction for mortality and morbidity costs and expense charges.

(o) Other revenue recognition Interest income for all interest-bearing financial instruments including financial instruments

measured at FVTPL, are recognised within investment income in profit or loss using the effective interest rate method. When a receivable is impaired, the Company reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income.

Rental income from investment properties is recognised on an accrual basis. Dividend income is recognised when the right to receive payment is established. Gains or losses arising on disposal of investments are credited or charged to profit or loss. Commission income comprises of reinsurance commission income are credited to profit or

loss over the period in which they are earned. Insurance contract policyholders are charged for policy administration services, investment

management services, surrenders and other contract fees. These fees are recognised as revenue over the period in which the related services are performed. If the fees are for services to be provided in future periods, they are deferred and recognised over those future periods.

Registration No.

199801001430 (457556-X)

52




(p) Leases

Accounting policies on lessee accounting applied from 1 January 2019

From 1 January 2019, leases are recognised as right-of-use (‘ROU’) asset and a

corresponding liability at the date on which the leased asset is available for use by the Company (i.e. the commencement date).

Contracts may contain both lease and non-lease components. The Company allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of properties for which the Company is a lessee, it has elected the practical expedient provided in MFRS 16 not to separate lease and non-lease components. Both components are accounted for as a single lease component and payments for both components are included in the measurement of lease liability.

(i) Lease term

In determining the lease term, the Company considers all facts and circumstances that create an economic incentive to exercise an extension option, or not to exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not to be terminated). The Company reassesses the lease term upon the occurrence of a significant event or change in circumstances that is within the control of the Company and affects whether the Company is reasonably certain to exercise an option not previously included in the determination of lease term, or not to exercise an option previously included in the determination of lease term. A revision in lease term results in remeasurement of the lease liabilities. See accounting policy below on lease liabilities.

(ii) ROU assets ROU assets are initially measured at cost comprising the following: - The amount of the initial measurement of lease liability; - Any lease payments made at or before the commencement date less any lease

incentive received; - Any initial direct costs; and - Decommissioning or restoration costs.

ROU assets that are not investment properties are subsequently measured at cost, less accumulated depreciation and impairment loss (if any). The ROU assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Company is reasonably certain to exercise a purchase option, the ROU asset is depreciated over the underlying asset’s useful life. In addition, the ROU assets are adjusted for certain remeasurement of the lease liabilities.

Registration No.

199801001430 (457556-X)

53




(p) Leases (continued)

Accounting policies on lessee accounting applied from 1 January 2019 (continued)

(iii) Leased liabilities

Lease liabilities are initially measured at the present value of the lease payments that are not paid at that date. The lease payments include the following: - Fixed payments (including in-substance fixed payments), less any lease incentive

receivable; - Variable lease payments that are based on an index or a rate, initially measured

using the index or rate as at the commencement date; - Amounts expected to be payable by the Company under residual value guarantees; - The exercise price of a purchase and extension options if the Company is reasonably

certain to exercise that option; and - Payments of penalties for terminating the lease, if the lease term reflects the

Company exercising that option. Lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Company, the lessee’s incremental borrowing is used. This is the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the ROU in a similar economic environment with similar term, security and conditions.

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs. The Company presents the lease liabilities as a separate line item in the statement of financial position. Interest expense on the lease liability is presented within the finance cost in profit or loss.

(iv) Reassessment of lease liabilities

The Company is also exposed to potential future increases in variable lease payments that depend on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is remeasured and adjusted against the ROU assets.

(v) Short term leases and leases of low value assets

Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture. Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line bases as an expense in profit or loss.

Registration No.

199801001430 (457556-X)

54




(p) Leases (continued)

Accounting policies on lessee accounting applied until 31 December 2018 Operating leases Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on the straight-line basis over the lease period. Accounting policies on lessor accounting applied from 1 January 2019 As a lessor, the Company determines at lease inception whether each lease is a finance lease or an operating lease. To classify each lease, the Company makes an overall assessment of whether the lease transfer substantially all the risks and rewards incidental to ownership of the underlying asset to lessee. As part of this assessment, the Company considers certain indicators such as whether the lease is for the major part of the economic life of the assets. a) Operating leases

The Company classifies a lease as an operating lease if the lease does not transfer substantially all the risks and rewards incidental to ownership of the underlying asset to lessee. The Company recognizes lease payment received under operating lease as lease income on a straight-line basis over the lease term.

b) Separating lease and non-lease components If an arrangement contains lease and non-lease components, the Company allocates the consideration in the contract to the lease and to non-lease component based on the standalone selling prices in accordance with the principles in MFRS 15 “Revenue from Contracts with Customers”.

Accounting policies on lessor accounting applied until 31 December 2018 When assets are leased out under an operating lease, the asset is included in the statement of financial position based on nature of the asset. Lease income is recognized over the term of the lease on a straight-line basis.

Registration No.

199801001430 (457556-X)

55




(q) Income taxes

Current tax expense is determined according to the tax laws of the jurisdiction in which the Company operates and include all taxes based upon the taxable profits. The tax expense on the Life Fund is based on the method prescribed under the Income Tax Act, 1967 for life insurance business. Current tax is recognised in profit or loss. Deferred tax is recognised in full, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purpose and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the deductible temporary differences or unused tax losses can be utilised.

Deferred tax is determined using tax rates (and tax laws) that have been enacted or

substantially enacted by the date of the statement of financial position and are expected to apply when the related deferred tax assets is realised or the deferred tax liability is settled.

Deferred tax is recognised in profit or loss except when it arises from a transaction which is

recognised in other comprehensive income, in which case, the deferred tax is also charged or credited to other comprehensive income.

The Company presumed investment property measured at fair value will be recovered entirely

through sale. Accordingly, deferred tax assets or liabilities arising on such investment property are measured at the tax rate of 8% when the Company sells the property.

(r) Foreign currencies Items included in the financial statements of the Company are measured using the currency

of the primary economic environment in which the entity operates (the “functional currency”). The financial statements are presented in RM, which is the Company’s functional and presentation currency.

Foreign currency transactions are translated into the functional currency using the exchange

rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Registration No.

199801001430 (457556-X)

56




(s) Employee benefits

(i) Short term employee benefits

Wages, salaries, paid annual leave and bonuses are accrued in the financial year in which the associated services are rendered by employees of the Company.

(ii) Post-employment benefits

Defined contribution plan

The Company’s contributions to the Employees’ Provident Fund (“EPF”), the national defined contribution plan, are charged to profit or loss in the financial year to which they relate. Once the contributions have been paid, the Company has no further payment obligations.

(t) Contingent liabilities and contingent assets

The Company does not recognise a contingent liability but discloses its existence in the

financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably.

A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company. The Company does not recognise contingent assets but discloses their existence where inflows of economic benefits are probable, but not virtually certain.

(u) Dividends Dividends are recognised as liabilities when the obligation to pay is established in which the

dividends are declared and approved by the Company’s shareholders and the regulator. No provision is made for a proposed dividend.

Registration No.

199801001430 (457556-X)

57




(v) Provisions

Provisions for agency long association benefits is recognised when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made.

(w) Insurance payables and other payables

Insurance payables and other payables are recognised when due and measured on initial

recognition at the fair value less directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective yield method.

(x) Cash and cash equivalents

Cash and cash equivalents consist of cash and bank balances, and fixed and call deposits

with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. It excludes deposits which are held for investment purpose.

(y) Statement of cash flows The Company classifies the cash flows for the purchase and disposal of financial investments

as operating cash flows, as the purchases are funded from cash flows associated with the origination of insurance contracts, net of cash flows for payments of benefits and claims incurred for insurance contracts, which are respectively treated under operating activities.

(z) Share capital Ordinary shares are classified as equity. Incremental costs that are directly attributable to the

issuance of new shares are recognised as equity, net of tax. (aa) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided

to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing

performance of the operating segments, has been identified as the Chief Executive Officer that makes strategic decisions.

Registration No.

199801001430 (457556-X)

58



2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.3 Significant Accounting Judgements, Estimates and Assumptions

The preparation of the Company’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. These factors could include:

(a) Critical judgements in applying the Company’s accounting policies

In determining and applying accounting policies, judgement is often required in respect of

items where the choice of specific policy could materially affect the reported results and

financial position of the Company. However, the Directors are of the opinion that there are

currently no accounting policies which require significant judgement to be exercised.

(b) Key sources of estimation, uncertainty and assumptions

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

Actuarial liabilities of life policyholders’ fund The principles on which the valuation of the actuarial liabilities of life insurance contracts was determined by the Appointed Actuary having regard to the statutory requirements determined by BNM. The actuarial valuation was carried out using a prospective cash flow method, known as gross premium valuation method. The policy liabilities are determined first by projecting future cash flows using realistic assumptions and then discounting these cash flow streams at appropriate interest rates. For participating policies, the policy liability includes provision for future payments arising for both guaranteed and non-guaranteed benefits. Additional provision may be required in the valuation assumptions to allow for any adverse deviation from the best estimate experience and to reflect the inherent uncertainty of the best estimate of the actuarial liabilities held.

The Company conducted a sensitivity analysis on the gross actuarial liabilities as at 31 December 2019, based on the change in one specific assumption while holding all other assumptions constant as disclosed in Note 30 to the financial statements.

Registration No.

199801001430 (457556-X)

59




2.4 Standards, amendments to published standards and interpretations to existing standards that are

applicable and relevant to the Company

(a) The standards applicable for the first time for the financial year beginning on 1 January 2019: (i) MFRS 16 ‘Leases’

See Note 35 for the changes in accounting policies upon adoption of MFRS 16.

(ii) IC Interpretation 23 ‘Uncertainty over Income Tax Treatments’

IC Interpretation 23 ‘Uncertainty over Income Tax Treatments’ (effective 1 January 2019) provides guidance on how to recognise and measure deferred and current income tax assets and liabilities where there is uncertainty over a tax treatment. If an entity concludes that it is not probable that the tax treatment will be accepted by the tax authority, the effect of the tax uncertainty should be included in the period when such determination is made. An entity shall measure the effect of uncertainty using the method which best predicts the resolution of the uncertainty. IC Interpretation 23 will be applied retrospectively.

(b) The Company will apply the new standards, amendments to published standards and interpretations that are issued but not yet effective in the following financial years:

Financial year beginning on/after 1 January 2020

(i) The Conceptual Framework for Financial Reporting (Revised 2018)

(ii) Amendments to MFRS 101 ‘Presentation of Financial Statements – Definition of Material’ (iii) Amendments to MFRS 108 ‘Accounting Policies, Changes in Accounting Estimates and

Errors – Definition of Material’ (iv) Amendments to MFRS 3 ‘Business Combinations – Definition of a Business’ (v) Amendments to MFRS 9, MFRS 139, MFRS 7 – Interest Rate Benchmark Reform

Registration No.

199801001430 (457556-X)

60





applicable and relevant to the Company (continued)

(b) The Company will apply the new standards, amendments to published standards and interpretations that are issued but not yet effective in the following financial years: (continued)

Financial year beginning on/after 1 January 2021

(i) MFRS 17 ‘Insurance Contracts’

MFRS 17 applies to insurance contracts issued, to all reinsurance contracts and to investment contracts with discretionary participating features if an entity also issues insurance contracts. For fixed-fee service contracts whose primary purpose is the provision of services, an entity has an accounting policy choice to account for them in accordance with either MFRS 17 or MFRS 15 ‘Revenue’. An entity is allowed to account financial guarantee contracts in accordance with MFRS 17 if the entity has asserted explicitly that it regarded them as insurance contracts.

Insurance contracts, (other than reinsurance) where the entity is the policyholder are not within the scope of MFRS 17. Embedded derivatives and distinct investment and service components should be ‘unbundled’ and accounted for separately in accordance with the related MFRSs. Voluntary unbundling of other components is prohibited. MFRS 17 requires a current measurement model where estimates are remeasured at each reporting period. The measurement is based on the building blocks of discounted, probability-weighted cash flows, a risk adjustment and a contractual service margin (“CSM”) representing the unearned profit of the contract. An entity has a policy choice to recognise the impact of changes in discount rates and other assumptions that related to financial risks either in profit or loss or in other comprehensive income. Alternative measurement models are provided for the different insurance coverages:

- Simplified Premium Allocation Approach if the insurance coverage period is a year or less.

- Variable Fee Approach should be applied for insurance contracts that specify a link between payments to the policyholder and the returns on the underlying items.

Registration No.

199801001430 (457556-X)

61





applicable and relevant to the Company (continued)

(b) The Company will apply the new standards, amendments to published standards and interpretations that are issued but not yet effective in the following financial years: (continued)

Financial year beginning on/after 1 January 2021 (continued)

(i) MFRS 17 ‘Insurance Contracts’ (continued)

The requirements of MFRS 17 align the presentation of revenue with other industries. Revenue is allocated to the periods in proportion to the value of the expected coverage and other services that the insurer provides in the period, and claims are presented when incurred. Investment components are excluded from revenue and claims.

Insurers are required to disclose information about amounts, judgements and risks arising from insurance contracts. The International Accounting Standards Board has tentatively proposed to amend the effective date of IFRS 17 ‘Insurance Contracts’ to 1 January 2022.

Other than MFRS 9 and MFRS 17, the above standards, amendments to published standards and interpretations to existing standards are not anticipated to have any significant impact on the financial statements of the Company in the year of initial application. The Company has yet to assess the full impact of MFRS 9 and MFRS 17 onto the Company’s accounting policies and will complete the process prior to the reporting requirement deadline.

Registration No.

199801001430 (457556-X)

62



3 PROPERTY, PLANT AND EQUIPMENT Office equipment, Motor furniture Computer Work-in- Freehold Leasehold Freehold Leasehold vehicles and fittings equipment Renovation progress land land buildings buildings Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Cost/Valuation At 1 January 2019 995 7,278 10,406 20,824 - 79,348 5,850 72,064 3,483 200,248 Additions - 238 1,511 2,056 - - - - - 3,805 Disposals (77) (3) - - - - - - - (80) Write-offs - (118) (2,161) - - - - - - (2,279) Transferred to investment properties (Note 4) - - - - - (29) - (46) - (75) Transferred from/(to) intangible assets (Note 5) - 38 (162) - - - - - (124) Revaluation surplus for the financial year - - - - - 122 141 2,593 101 2,957 Elimination of accumulated depreciation arising from revaluation - - - - - - (57) (2,604) (51) (2,712) ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

At 31 December 2019 918 7,433 9,594 22,880 - 79,441 5,934 72,007 3,533 201,740 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Cost 918 7,433 9,594 22,880 - - - - - 40,825 Valuation - - - - - 79,441 5,934 72,007 3,533 160,915 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

At 31 December 2019 918 7,433 9,594 22,880 - 79,441 5,934 72,007 3,533 201,740 ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════

Registration No.

199801001430 (457556-X)

63



3 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Office equipment, Motor furniture Computer Work-in- Freehold Leasehold Freehold Leasehold vehicles and fittings equipment Renovation progress land land buildings buildings Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Accumulated depreciation At 1 January 2019 637 3,686 7,287 13,840 - - - - - 25,450 Charge for the financial year

(Note 21) 126 574 1,271 1,158 - - 57 2,604 51 5,841 Disposals (77) (3) - - - - - - - (80) Write-offs - (96) (2,143) - - - - - - (2,239)

Elimination of accumulated depreciation arising from revaluation - - - - - - (57) (2,604) (51) (2,712) ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

At 31 December 2019 686 4,161 6,415 14,998 - - - - - 26,260 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Net book value At 31 December 2019 232 3,272 3,179 7,882 - 79,441 5,934 72,007 3,533 175,480 ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════

Registration No.

199801001430 (457556-X)

64



3 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Office equipment, Motor furniture Computer Work-in- Freehold Leasehold Freehold Leasehold vehicles and fittings equipment Renovation progress land land buildings buildings Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Cost/Valuation

At 1 January 2018 1,438 6,084 8,615 16,845 2,017 75,331 5,998 71,931 3,024 191,283 Additions - 1,313 1,815 1,859 1,405 - - - - 6,392 Disposals (443) - - - - - - - - (443) Write-offs - (551) (608) (295) - - - - - (1,454) Transferred to investment properties (Note 4) - - - - - (18) - (29) - (47) Transferred from intangible assets (Note 5) - - 9 - - - - - 9 Reclassification - 432 575 2,415 (3,422) - - - - - Revaluation surplus/(deficit) for the financial year - - - - - 4,035 (90) 2,525 509 6,979 Elimination of accumulated depreciation arising from revaluation - - - - - - (58) (2,363) (50) (2,471) ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

At 31 December 2018 995 7,278 10,406 20,824 - 79,348 5,850 72,064 3,483 200,248 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Cost 995 7,278 10,406 20,824 - - - - - 39,503 Valuation - - - - - 79,348 5,850 72,064 3,483 160,745 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

At 31 December 2018 995 7,278 10,406 20,824 - 79,348 5,850 72,064 3,483 200,248 ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════

Registration No.

199801001430 (457556-X)

65



3 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Office equipment, Motor furniture Computer Work-in- Freehold Leasehold Freehold Leasehold vehicles and fittings equipment Renovation progress land land buildings buildings Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Accumulated depreciation At 1 January 2018 930 3,677 6,125 13,058 - - - - - 23,790 Charge for the financial year

(Note 21) 149 509 1,747 1,053 - - 58 2,363 50 5,929 Disposals (442) - - - - - - - - (442) Write-offs - (500) (585) (271) - - - - - (1,356)

Elimination of accumulated depreciation arising from revaluation - - - - - - (58) (2,363) (50) (2,471) ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

At 31 December 2018 637 3,686 7,287 13,840 - - - - - 25,450 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Net book value At 31 December 2018 358 3,592 3,119 6,984 - 79,348 5,850 72,064 3,483 174,798 ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════

Registration No.

199801001430 (457556-X)

66



3 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) The net book value of revalued land and buildings, had these assets been carried at cost less accumulated depreciation is as follows: Freehold Leasehold Freehold Leasehold land land buildings buildings Total RM’000 RM’000 RM’000 RM’000 RM’000 At 31 December 2019 15,732 3,493 53,117 2,486 74,828 ════════ ════════ ════════ ════════ ════════

At 31 December 2018 15,732 3,529 54,817 2,507 76,585 ════════ ════════ ════════ ════════ ════════

The fair value hierarchy of the self-occupied properties is as follows: Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000 31 December 2019 Recurring fair value measurements - Freehold land - - 79,441 79,441 - Leasehold land - - 5,934 5,934 - Buildings - - 75,540 75,540 ──────── ──────── ──────── ────────

- - 160,915 160,915 ════════ ════════ ════════ ════════

31 December 2018 Recurring fair value measurements - Freehold land - - 79,348 79,348 - Leasehold land - - 5,850 5,850 - Buildings - - 75,547 75,547 ──────── ──────── ──────── ────────

- - 160,745 160,745 ════════ ════════ ════════ ════════

Registration No.

199801001430 (457556-X)

67



3 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) The Company engages external, independent and qualified valuer to determine the fair value of the Company’s land and buildings annually. As at 31 December 2019, the fair values of the self-occupied properties have been determined by Raine & Horne International Zaki + Partners Sdn. Bhd. The main level 3 inputs used by the Company are term yield, reversionary yield and average price per square feet derived and evaluated by Raine & Horne International Zaki + Partners Sdn. Bhd. based on comparable transactions and industry data. The self-occupied properties of the Company were valued by an independent professional valuer based on the following parameters:

Description

Fair

value (RM’000)

Valuation technique

Unobservable

Inputs

Input

Sensitivity in term yield and reversionary yield +/- 25

basis point

(RM’000)

Sensitivity in average price per

square feet +/- 5%

(RM’000)

31 December 2019

Self-occupied properties

160,915 Investment method and comparison method

Term yield 6.00% +402 -

Reversionary yield

6.50% -402 -

Average price per square feet

RM250to

RM891

- -

+8,046 -8,046

31 December 2018

Self-occupied properties

160,745

Investment method and comparison method

Term yield 6.00% +402 -

Reversionary yield

6.50% -402 -


RM250 to

RM891

- -

+8,037 -8,037

Registration No.

199801001430 (457556-X)

68



4 INVESTMENT PROPERTIES

RM’000 At 1 January 2019 159,095 Transferred from property, plant and equipment (Note 3) 75 Fair value changes for the financial year (Note 18) 8,934 ────────

At 31 December 2019 168,104 ════════

At 1 January 2018 148,408 Transferred from property, plant and equipment (Note 3) 47 Fair value changes for the financial year (Note 18) 10,640 ────────

At 31 December 2018 159,095 ════════

The fair value hierarchy of the investment properties is as follows: Level 1 Level 2 Level 3 Total RM’000 RM’000 RM’000 RM’000 31 December 2019 Recurring fair value measurements - Freehold land - - 113,019 113,019 - Leasehold land - - 6,056 6,056 - Buildings - - 49,029 49,029 ──────── ──────── ──────── ────────

- - 168,104 168,104 ════════ ════════ ════════ ════════

31 December 2018 Recurring fair value measurements - Freehold land - - 104,032 104,032 - Leasehold land - - 5,970 5,970 - Buildings - - 49,093 49,093 ──────── ──────── ──────── ────────

- - 159,095 159,095 ════════ ════════ ════════ ════════

Registration No.

199801001430 (457556-X)

69



4 INVESTMENT PROPERTIES (CONTINUED) The Company engages external, independent and qualified valuers to determine the fair value of the Company’s land and buildings annually. As at 31 December 2019, the fair values of the investment properties have been determined by Raine & Horne International Zaki + Partners Sdn. Bhd. The main level 3 inputs used by the Company are average price per square feet derived and evaluated by Raine & Horne International Zaki + Partners Sdn. Bhd. based on comparable transactions and industry data. The investment properties of the Company were valued by an independent professional valuer based on the following parameters:

Description

Fair

value (RM’000)

Valuation technique

Unobservable

Inputs

Input

Sensitivity in average price per

square feet +/- 5%

(RM’000)

31 December 2019

Investment properties

168,104 Comparison method


RM14 to RM1,085

+8,405 -8,405

31 December 2018

Investment properties

159,095 Comparison method


RM14 to RM1,022

+7,955 -7,955

The rental income and direct operating expenses arising from investment properties that have been recognised in profit or loss during the financial year are as follows: 2019 2018 RM’000 RM’000 Rental income 9,378 9,529 Direct operating expenses (6,871) (7,410) ──────── ────────

2,507 2,119 ════════ ════════

Registration No.

199801001430 (457556-X)

70



5 INTANGIBLE ASSETS Bancassurance Computer fee software Total RM’000 RM’000 RM’000 Net book value 2019 At 1 January 2019 25,250 14,272 39,522 Additions - 4,446 4,446 Transferred from property, plant and equipment (Note 3) - 124 124 Amortisation charged to profit or loss (Note 21) (25,250) (6,987) (32,237) ──────── ──────── ────────

At 31 December 2019 - 11,855 11,855 ════════ ════════ ════════

Cost 186,647 40,802 227,449 Accumulated amortisation (186,647) (28,947) (215,594) ──────── ──────── ────────

At 31 December 2019 - 11,855 11,855 ════════ ════════ ════════

2018 At 1 January 2018 50,499 18,944 69,443 Additions - 2,155 2,155 Transferred to property, plant and equipment (Note 3) - (9) (9) Amortisation charged to profit or loss (Note 21) (25,249) (6,818) (32,067) ──────── ──────── ────────

At 31 December 2018 25,250 14,272 39,522 ════════ ════════ ════════

Cost 186,647 38,464 225,111 Accumulated amortisation (161,397) (24,192) (185,589) ──────── ──────── ────────

At 31 December 2018 25,250 14,272 39,522 ════════ ════════ ═══════

Included in the net book value of computer software, there are software under development phase amounting to RM4,126,000 as at 31 December 2019 (2018: RM2,757,000).

Registration No.

199801001430 (457556-X)

71



6 FINANCIAL INVESTMENTS 2019 2018 RM’000 RM’000 Malaysian government securities 500,431 534,699 Malaysian government guaranteed bonds 1,511,327 1,405,288 Government investment issues 418,532 349,967 Corporate debt securities 2,962,494 2,882,303 Equity securities 1,858,225 1,535,711 Collective investment schemes 568,239 489,702 Loans 461,177 484,335 ──────── ────────

8,280,425 7,682,005 ════════ ════════

The Company’s financial investments are summarised by the following categories: AFS financial assets 5,759,386 5,352,099 FVTPL financial assets 1,096,138 860,571 HTM financial assets 963,724 985,000 Loans and receivables 461,177 484,335 ──────── ────────

8,280,425 7,682,005 ════════ ════════

6a AFS FINANCIAL ASSETS

At fair value: Malaysian government securities 235,775 272,477 Malaysian government guaranteed bonds 1,063,537 957,054 Government investment issues 241,324 197,154 Corporate debt securities 2,480,981 2,442,721 Equity securities 1,595,170 1,363,485 Collective investment schemes 142,599 119,208 ──────── ────────

5,759,386 5,352,099 ════════ ════════

Current 407,014 320,275 Non-current 5,352,372 5,031,824 ──────── ────────

5,759,386 5,352,099 ════════ ════════

Registration No.

199801001430 (457556-X)

72



6 FINANCIAL INVESTMENTS (CONTINUED) 6a AFS FINANCIAL ASSETS (continued)

Movement in impairment allowance accounts: 2019 2018 RM’000 RM’000 Allowance for impairment loss: At 1 January 95,007 49,797 Transferred to realised gain upon disposal (44,084) (20,346) Impairment loss during the financial year (Note 17) 11,966 65,556 ──────── ────────

At 31 December 62,889 95,007 ════════ ════════

The impairment losses arose on equity securities for which there have been significant or prolonged decline in fair value.

6b FVTPL FINANCIAL ASSETS

2019 2018 RM’000 RM’000 At fair value: Malaysian government securities 32,624 30,323 Malaysian government guaranteed bonds 5,715 5,085 Government investment issues 60,207 35,726 Corporate debt securities 308,897 246,717 Equity securities 263,055 172,226 Collective investment schemes 425,640 370,494 ──────── ────────

1,096,138 860,571 ════════ ════════

Current 28,535 30,289 Non-current 1,067,603 830,282 ──────── ────────

1,096,138 860,571 ════════ ════════

Registration No.

199801001430 (457556-X)

73



6 FINANCIAL INVESTMENTS (CONTINUED)

6c HTM FINANCIAL ASSETS 2019 2018 RM’000 RM’000 At amortised cost: Malaysian government securities 232,032 231,899 Malaysian government guaranteed bonds 442,075 443,149 Government investment issues 117,001 117,087 Corporate debt securities 172,616 192,865 ──────── ────────

963,724 985,000 ════════ ════════

Current 10,125 20,160 Non-current 953,599 964,840 ──────── ────────

963,724 985,000 ════════ ════════

At fair value: Malaysian government securities 250,817 232,261 Malaysian government guaranteed bonds 491,989 452,309 Government investment issues 129,357 117,297 Corporate debt securities 185,707 198,284 ──────── ────────

1,057,870 1,000,151 ════════ ════════

Registration No.

199801001430 (457556-X)

74




6d LOANS AND RECEIVABLES 2019 2018 RM’000 RM’000 At amortised cost: Secured: Policy loans* 460,216 483,310 Mortgage loans 961 1,010 Other loans - 15 ──────── ────────

461,177 484,335 ════════ ════════

* Accrued interest income is included at fixed rate The carrying values of loans and receivables approximate the fair values at the date of the statement of financial position. 2019 2018 RM’000 RM’000 Current - - Non-current 461,177 484,335 ──────── ────────

461,177 484,335 ════════ ════════

Registration No.

199801001430 (457556-X)

75




6e MOVEMENTS IN THE CARRYING VALUES OF FINANCIAL INSTRUMENTS AFS FVTPL HTM LAR Total RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2018 5,489,109 813,666 961,325 477,247 7,741,347 Purchases 1,063,412 217,860 49,668 - 1,330,940 Maturities (763,415) (10,000) (25,000) - (798,415) Disposals (275,109) (77,440) (1,000) - (353,549) Increase in loans - - - 7,088 7,088 Movement of investment income accrued 1,554 962 25 - 2,541 Fair value losses recorded in: - Profit or loss (2,299) (84,477) (25) - (86,801) - Other comprehensive loss (166,712) - - - (166,712) Amortisation adjustment (Note 16) 5,559 - 7 - 5,566 ──────── ──────── ──────── ──────── ────────

At 31 December 2018 5,352,099 860,571 985,000 484,335 7,682,005 Purchases 1,729,714 817,195 - - 2,546,909 Maturities (765,329) (152,588) (20,000) - (937,917) Disposals (746,694) (490,555) (1,000) - (1,238,249) Decrease in loans - - - (23,158) (23,158) Movement of investment income accrued 56 797 (186) - 667 Fair value gains/(losses) recorded in: - Profit or loss 149,833 60,718 (22) - 210,529 - Other comprehensive income 33,486 - - - 33,486 Amortisation adjustment (Note 16) 6,221 - (68) - 6,153 ──────── ──────── ──────── ──────── ────────

At 31 December 2019 5,759,386 1,096,138 963,724 461,177 8,280,425 ════════ ════════ ════════ ════════ ════════

Registration No.

199801001430 (457556-X)

76



6 FINANCIAL INVESTMENTS (CONTINUED) 6f FAIR VALUES OF FINANCIAL INSTRUMENTS

The following tables show financial investments recorded at fair value analysed by the different basis of fair values as follows: AFS FVTPL HTM Total RM’000 RM’000 RM’000 RM’000 31 December 2019 Level 1 1,633,003 265,743 - 1,898,746 Level 2 4,112,196 830,395 1,057,870 6,000,461 Level 3 14,187 - - 14,187 ──────── ──────── ──────── ────────

5,759,386 1,096,138 1,057,870 7,913,394 ════════ ════════ ════════ ════════

31 December 2018 Level 1 1,384,719 172,227 - 1,556,946 Level 2 3,954,686 688,344 1,000,151 5,643,181 Level 3 12,694 - - 12,694 ──────── ──────── ──────── ────────

5,352,099 860,571 1,000,151 7,212,821 ════════ ════════ ════════ ════════

Level 1 financial instruments are measured in whole or in part by reference to published quotes in an active market. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, secondary market via dealer and broker, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

Level 2 financial instruments are measured using a valuation technique based on assumptions that are supported by prices from observable current market transactions that are instruments for which pricing is obtained via pricing services but where prices have not been determined in an active market, instruments with fair values based on broker quotes, investment in unit and property trusts with fair values obtained via fund managers and instruments that are valued using the Company’s own models whereby the majority of assumptions are market observable. Level 3 financial instruments are determined in whole or in part using a valuation technique based on assumptions that are neither supported by prices from observable current market transactions in the same instrument nor are they based on available market data. The main asset class in this category are unquoted equity securities. Valuation techniques are used to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the instrument at the measurement date. However, the fair value measurement objective remains the same, that is, an exit price from the perspective of the Company. Therefore, unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use in pricing the instrument (including assumptions about risk). These inputs are developed based on the best information available, which might include the Company’s own data.

Registration No.

199801001430 (457556-X)

77



6 FINANCIAL INVESTMENTS (CONTINUED) 6f FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

The following table presents the changes in Level 3 instruments: AFS 2018 2017 2019 2018 RM’000 RM’000 At the beginning of the financial year - 12,694 8,259 Fair value gains recognised in other comprehensive income 1,493 4,435 ──────── ────────

At the end of the financial year 14,187 12,694

════════ ══ ════════ ════════

7 INSURANCE RECEIVABLES 2019 2018 RM’000 RM’000

Due premiums including agents/brokers balances 26,869 37,466 Due from reinsurers and cedants 2,914 19,337 ──────── ────────

29,783 56,803 Accumulated impairment loss (Note 31) (193) (399) ──────── ────────

29,590 56,404 ════════ ════════

The carrying values disclosed above approximate the fair values at the date of the statement of financial position, and are receivable within one year.

Registration No.

199801001430 (457556-X)

78



8 OTHER RECEIVABLES 2019 2018 RM’000 RM’000

Amount due from related parties (Note 27) 30 66 Investment income receivable 3,171 5,534 Outstanding proceeds from sale of investments 26,189 3,505 Prepayment of expenses 662 466 Deposits 551 990 Others 5,497 7,505

──────── ────────

36,100 18,066 Accumulated impairment loss (Note 31) (819) (427)

──────── ────────

35,281 17,639 ════════ ════════

The carrying values of financial receivables disclosed above approximate the fair values at the date of the statement of financial position, and are receivable within one year.

9 SHARE CAPITAL Number of shares ’000 RM’000 Ordinary shares issued and fully paid up: At the beginning and end of the financial year 226,000 226,000 ════════ ════════

The holders of ordinary shares are entitled to receive dividends or declared from time-to-time and are entitled to one vote per share at general meetings of the Company.

Registration No.

199801001430 (457556-X)

79



10 RETAINED EARNINGS Under the single-tier system which came into effect from the year of assessment 2008 onwards, companies are not required to have tax credits under Section 108 of the Income Tax Act, 1967 for dividend payment purposes. Dividends paid under this system will be tax exempt in the hands of shareholders. The Company may distribute single tier exempt dividend to its shareholders out of its retained earnings. Pursuant to Section 51(1) of the Financial Services Act, 2013, the Company is required to obtain BNM’s written approval prior to declaring or paying any dividend. Pursuant to the RBC Framework for Insurers, the Company shall not pay dividends if its Capital Adequacy Ratio position is less than its internal target capital level or if the payment of dividend would impair its Capital Adequacy Ratio position to below its internal target.

11 INSURANCE CONTRACT LIABILITIES 2019 2018 Gross Gross RM’000 RM’000 Life insurance contract liabilities 7,258,035 6,925,261 ════════ ════════

The life insurance contract liabilities and the movements are further analysed as follows: 2019 2018 Gross Gross RM’000 RM’000 Actuarial liabilities 5,709,211 5,678,189 Unallocated surplus 387,853 266,111 Provision for outstanding claims 185,007 148,720 Available-for-sale fair value adjustment 384,231 420,848 Asset revaluation surplus adjustment 44,648 42,152 Net asset value attributable to unitholders (Note 33) 547,085 369,241 ──────── ────────

7,258,035 6,925,261 ════════ ════════

Registration No.

199801001430 (457556-X)

80



11 INSURANCE CONTRACT LIABILITIES (CONTINUED)

Gross With Without DPF DPF Total RM’000 RM’000 RM’000 At 1 January 2019 5,593,286 1,331,975 6,925,261 Premiums received 353,321 977,539 1,330,860 Liabilities paid for death, maturities, surrenders, benefits and claims (761,751) (393,974) (1,155,725) Benefits and claims experience variation (114,811) (70,859) (185,670) Policy movements 345,022 (152,532) 192,490 Adjustments due to changes in assumptions: Mortality/morbidity (14,152) 10,920 (3,232) Lapse and surrender rates (15,395) (4,949) (20,344) Expenses 8,318 27,389 35,707 Others (1,961) (447) (2,408) Movement in unallocated surplus 121,742 - 121,742 Available-for-sale fair value adjustment (36,617) - (36,617) Net asset value attributable to unitholders - 17,188 17,188 Movement in provision for outstanding claims 20,817 15,470 36,287 Asset revaluation surplus adjustment 2,496 - 2,496 ──────── ──────── ────────

At 31 December 2019 5,500,315 1,757,720 7,258,035 ════════ ════════ ════════

At 1 January 2018 5,813,613 1,094,684 6,908,297 Premiums received 413,620 887,271 1,300,891 Liabilities paid for death, maturities, surrenders, benefits and claims (666,383) (335,159) (1,001,542) Benefits and claims experience variation 100,705 (148,753) (48,048) Policy movements 181,684 (167,668) 14,016 Adjustments due to changes in assumptions: Mortality/morbidity - 8,708 8,708 Lapse and surrender rates - (5,694) (5,694) Expenses 763 1,734 2,497 Others 79,460 999 80,459 Movement in unallocated deficit (199,857) - (199,857) Available-for-sale fair value adjustment (155,687) - (155,687) Net asset value attributable to unitholders - (30,843) (30,843) Movement in provision for outstanding claims 19,437 26,696 46,133 Asset revaluation surplus adjustment 5,931 - 5,931 ──────── ──────── ────────

At 31 December 2018 5,593,286 1,331,975 6,925,261 ════════ ════════ ════════

Registration No.

199801001430 (457556-X)

81



12 INSURANCE PAYABLES 2019 2018 RM’000 RM’000

Due to agents, brokers and insureds 125,006 121,644 Due to reinsurers and cedants 6,367 12,157 Cash bonus and interest outstanding 391,230 374,462

──────── ────────

522,603 508,263 ════════ ════════

The carrying values disclosed above approximate the fair values at the date of the statement of financial position, and are payable within one year.

13 OTHER PAYABLES 2019 2018 RM’000 RM’000 Amount due to related parties (Note 27) 780 1,148 Outstanding payable on purchases of investment securities 6,975 3,763

Tenant deposits 2,727 2,677 Staff related accrued expenses 22,974 19,008 Other accrued expenses 24,316 24,462 Other payables 6,476 11,848

──────── ────────

64,248 62,906 ════════ ════════

The carrying values disclosed above approximate the fair values at the date of the statement of financial position, and are payable within one year.

Registration No.

199801001430 (457556-X)

82



14 PROVISION FOR AGENCY LONG ASSOCIATION BENEFITS 2019 2018 RM’000 RM’000 At 1 January 29,480 28,529 Charged to profit or loss 6,074 5,662 Paid during the financial year (4,176) (4,711) ──────── ────────

At 31 December 31,378 29,480 ════════ ════════

Payable within 12 months 9,252 8,128 Payable after 12 months 22,126 21,352 ──────── ────────

31,378 29,480 ════════ ════════

15 DEFERRED TAX LIABILITIES 2019 2018 RM’000 RM’000 At 1 January 196,281 185,985 Recognised in: Profit or loss (Note 22) 3,431 19,322 Other comprehensive income/(loss) 16,375 (9,026) ──────── ────────

At 31 December 216,087 196,281 ════════ ════════

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority.

Registration No.

199801001430 (457556-X)

83



15 DEFERRED TAX LIABILITIES (CONTINUED) Unallocated Property, Self- surplus arising plant and occupied Investment Financial from non-DPF equipment properties properties investments Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 At 1 January 2018 103,748 1,490 3,436 11,232 66,079 185,985 Recognised in: Profit or loss (Note 22) 28,601 (278) - 851 (9,852) 19,322 Other comprehensive income/(loss) - - 1,315 - (10,341) (9,026) ──────── ──────── ──────── ──────── ──────── ────────

At 31 December 2018 132,349 1,212 4,751 12,083 45,886 196,281 Recognised in: Profit or loss (Note 22) 7,590 (747) - 715 (4,127) 3,431 Other comprehensive income - - 282 - 16,093 16,375 ──────── ──────── ──────── ──────── ──────── ────────

At 31 December 2019 139,939 465 5,033 12,798 57,852 216,087 ════════ ════════ ════════ ════════ ════════ ════════

Registration No.

199801001430 (457556-X)

84



16 INVESTMENT INCOME 2019 2018 RM’000 RM’000 Net rental income from investment properties (Note 4) 2,507 2,119 FVTPL financial assets Interest 17,485 13,511 Dividend 8,512 7,974 AFS financial assets Interest 178,782 177,884 Dividend 54,528 57,362 Accretion of discounts – net (Note 6e) 6,221 5,559 HTM financial assets Interest 47,031 45,974 (Amortisation on premium)/accretion of discounts – net (Note 6e) (68) 7 Interest from loans 33,060 33,108 Interest from fixed and call deposits 11,707 12,384 ──────── ────────

359,765 355,882 Less: Investment expenses (9,743) (7,810) ──────── ────────

350,022 348,072 ════════ ════════

17 NET REALISED GAINS/(LOSSES) 2019 2018 RM’000 RM’000 Realised gains: AFS financial assets - Equity securities 154,617 62,180 - Debt securities 7,182 1,077 ──────── ────────

161,799 63,257 Impairment loss of AFS financial assets (Note 6a) (11,966) (65,556) ──────── ────────

Net gain/(loss) on disposal of AFS financial assets 149,833 (2,299) Gain on disposal of property, plant and equipment 8 92 ──────── ────────

149,841 (2,207) ════════ ════════

Registration No.

199801001430 (457556-X)

85



18 NET FAIR VALUE GAINS /(LOSSES) 2019 2018 RM’000 RM’000 Investment properties – fair value (Note 4) 8,934 10,640 FVTPL financial assets (Note 6e) 60,718 (84,477) Early redemption of HTM financial assets by issuers (Note 6e) (22) (25) ──────── ────────

69,630 (73,862) ════════ ════════

19 COMMISSION INCOME 2019 2018 RM’000 RM’000 Reinsurance commission income 3,445 5,152 ════════ ════════

20 OTHER OPERATING (EXPENSES)/INCOME– NET 2019 2018 RM’000 RM’000 Write-back of impairment/(impairment loss) of loan receivables 20 (305) Write-back of impairment of insurance receivables 206 1,076 (Impairment loss)/reversal of impairment of other receivables (1,294) 1,482 (Write-offs)/recovery of write-offs of insurance receivables (175) 3 Write-offs of property, plant and equipment (40) (98) Realised net foreign exchange loss (5) (11) Others 38 (152) ──────── ────────

(1,250) 1,995 ════════ ════════

Registration No.

199801001430 (457556-X)

86



21 MANAGEMENT EXPENSES 2019 2018 RM’000 RM’000 Staff salaries and bonuses 63,772 56,227 Contribution to Employees’ Provident Fund 9,494 8,422 Others 2,563 2,163 ──────── ────────

Staff costs 75,829 66,812 ──────── ────────

Non-Executive Directors - fees and other emoluments 441 440 ──────── ────────

Directors’ remuneration (Note 27(c)) 441 440 ──────── ────────

Depreciation of property, plant and equipment (Note 3) 5,841 5,929 Depreciation for right-of-use assets 663 - Amortisation of intangible assets (Note 5) 32,237 32,067 Auditors’ remuneration - statutory audit 483 480 - other audit services 728 10 - non-audit services 34 1,008 - (over)/under-provision of other audit services in prior financial years (70) 70 Printing and stationery 1,282 1,544 Postage, telephone and telex 1,196 1,394 EDP expenses 5,703 3,786 Advertising and marketing expenses 1,092 1,333 Rental of properties 27 445 Management fees 4,156 1,982 Training related expenses 2,724 1,979 Distribution related expenses 27,561 31,410 Others 21,105 27,412 ──────── ────────

104,762 110,849 ──────── ────────

Total 181,032 178,101 ════════ ════════

Included in staff costs are the remuneration, including benefits-in-kind, attributable to the Chief Executive Officer of the Company during the financial year which amounted to RM6.18 million (2018: RM5.00 million). A Director also received remuneration from related entities as full time employee.

Registration No.

199801001430 (457556-X)

87



21 MANAGEMENT EXPENSES (CONTINUED) (a) The total remuneration of the Chief Executive Officer during the financial year is as follows: 2019 2018 RM’000 RM’000

Salaries and other remuneration 2,577 2,580 Benefits-in-kind 34 34 Bonus 3,571 2,388

──────── ────────

6,182 5,002 ════════ ════════

(b) The details of remuneration of the Directors during the financial year are as follows: Other Fees emoluments Total RM’000 RM’000 RM’000

31 December 2019

Non-executive Directors: - Tan Sri Dato’ Dr Yahya Bin Awang 170 7 177 - Datuk Leong Kam Weng 130 7 137 - Chuah Sue Yin 120 7 127 ───────── ───────── ───────── 420 21 441 ═════════ ═════════ ═════════

31 December 2018

Non-executive Directors: - Tan Sri Dato’ Dr Yahya Bin Awang 170 7 177 - Datuk Leong Kam Weng 130 6 136 - Chuah Sue Yin 120 7 127 ───────── ───────── ───────── 420 20 440 ═════════ ═════════ ═════════

Registration No.

199801001430 (457556-X)

88



22 TAXATION 2019 2018 RM’000 RM’000 Current tax 47,615 29,246 Deferred tax (Note 15) 3,431 19,322 ──────── ────────

Taxation 51,046 48,568 ════════ ════════

Current tax Current financial year 47,656 29,621 Over-provision in prior financial years (41) (375) ──────── ────────

47,615 29,246 Deferred tax Origination and reversal of temporary differences (Note 15) 3,431 19,322 ──────── ────────

51,046 48,568 ════════ ════════

The explanation of the relationship between taxation, and profit before taxation and change in insurance contract liabilities is as follows: 2019 2018 RM’000 RM’000 Profit before taxation 71,323 156,661 ════════ ════════

Tax calculated at the Malaysian tax rate of 24% (2018: 24%) 17,117 37,599 Tax on investment income of policyholders’ and unitholder funds 40,147 16,322 Tax rate differential in respect of unallocated surplus (1,837) (5,911) Expenses not deductible for tax purposes 7,206 7,238 Section 110B tax credit (1,301) (1,515) Income not subject to tax (10,245) (4,790) Over-provision of tax in prior financial years (41) (375) ──────── ────────

Tax expense for the financial year 51,046 48,568 ════════ ════════

The tax expense of the Life Fund is based on the method prescribed under the Income Tax Act, 1967 for the life business, where the income tax in the Life Fund is calculated at 8% on investment income. The income tax for the Shareholders’ Fund is calculated based on the tax rate of 24% (2018: 24%) of the estimated assessable profit for the financial year. In 2008, the Ministry of Finance has gazetted an order on the allowance of income tax set-off/credit for the tax charged on the surplus transferred from the Life Fund to the Shareholders’ Fund with effect from year of assessment 2008 under Section 110B of the Income Tax Act, 1967.

Registration No.

199801001430 (457556-X)

89



23 BASIC EARNING PER SHARE

The earnings per share has been calculated based on the net profit for the financial year of RM20,277,000 (2018: RM108,093,000) and the weighted average number of ordinary shares of the Company in issue during the financial year of 226,000,000 (2018: 226,000,000) shares.

There have been no other transactions involving ordinary shares between the reporting date and the

date of completion of these financial statements.

24 DIVIDENDS PAID 2019 RM’000 In respect of the financial year ended 31 December 2018: Final single tier dividend of 16.24 sen per ordinary shares, paid on 28 June 2019 36,700 ════════

2018 RM’000 In respect of the financial year ended 31 December 2017:

Final single tier dividend of 4.42 sen per ordinary shares, paid on 10 July 2018 10,000 ════════

The Directors have not recommended any final dividend for the financial year ended 31 December 2019.

25 CAPITAL COMMITMENTS

Capital expenditure not provided for in the financial statements are as follows: 2019 2018 RM’000 RM’000

Authorised and contracted but not provided for: - Computer hardware and software 2,664 2,447 - Renovation 169 1,025

- Bancassurance fee 84,000 84,000 ──────── ────────

86,833 87,472 ════════ ════════

Approved and not contracted for: - Computer hardware and software 132 -

──────── ────────

132 - ════════ ════════

Registration No.

199801001430 (457556-X)

90



26 OPERATING LEASE COMMITMENTS 2019 2018 RM’000 RM’000 Commitments under non-cancellable operating leases where the Company is a lessee: Payable within one year 80 654 Payable after one year 154 441 ──────── ────────

234 1,095 ════════ ════════

Commitments under non-cancellable operating leases where the Company is a lessor: Receivable within one year 8,254 7,844 Receivable after one year 3,911 5,010 ──────── ────────

12,165 12,854 ════════ ════════

27 RELATED PARTY DISCLOSURES The related parties of, and their relationship with the Company, are as follows: Country of incorporation Relationship Tokio Marine Holdings, Inc. (“TMH”) Japan Ultimate holding corporation Tokio Marine & Nichido Life Insurance Co., Ltd. (“TMNL”) Japan Subsidiary of ultimate holding corporation Tokio Marine & Nichido Fire Insurance Co., Ltd. (“TMNF”) Japan Subsidiary of ultimate holding corporation Tokio Marine Life Insurance Singapore Ltd. (“TMLIS”) Singapore Holding corporation Tokio Marine Asia Pte. Ltd. (“TMAP”) Singapore Subsidiary of ultimate holding corporation Tokio Marine Asset Management International Pte. Ltd. (“TMAMI”) Singapore Subsidiary of ultimate holding corporation Tokio Marine Insurans (Malaysia) Berhad (“TMIM”) Malaysia Subsidiary of ultimate holding corporation Key management personnel - Key management personnel includes the

Directors, Chief Executive Officer (“CEO”) and senior management who report directly to the CEO

In the normal course of business, the Company undertakes at agreed terms and prices, various transactions with its holding and ultimate holding corporations and other corporations deemed related parties by virtue of them being members of Tokio Marine Holdings, Inc. group of corporations. The related party balances as at the date of the statement of financial position and significant related party transactions arising from normal business transactions during the financial year are set out below.

Registration No.

199801001430 (457556-X)

91



27 RELATED PARTY DISCLOSURES (CONTINUED) (a) Related party balances 2019 2018 RM’000 RM’000 Other receivables (Note 8)

Amount due from TMIM 30 66 ════════ ════════

Other payables (Note 13) Amount due to TMAP 780 1,148 ════════ ════════

Due from reinsurers and cedants Amount due from TMLIS - 5 ════════ ════════

Due to reinsurers and cedants Amount due to TMNL 681 729 ════════ ════════

(b) Significant related party transactions Income/(expense): Transactions with TMAMI: Cost of purchase of financial investments (16,949) (15,159) Proceeds from disposal of financial investments 379,546 6,867 ════════ ════════

Transactions with TMIM: Management fee 49 49 Premiums paid/payable – Non-life insurance (480) (535) Premiums received/receivable – Group insurance 331 287 Office rental 543 457 ════════ ════════

Transactions with TMAP: Management fee (826) (1,337) ════════ ════════

Registration No.

199801001430 (457556-X)

92



27 RELATED PARTY DISCLOSURES (CONTINUED) 2019 2018 RM’000 RM’000 (b) Significant related party transactions (continued) Income/(expense): (continued) Transactions with TMNL: Reinsurance arrangements (889) (736) ════════ ════════

Transactions with TMLIS: Reinsurance arrangements 5 5 ════════ ════════

(c) Key management compensation Salaries and bonuses 13,215 12,172 Directors’ remuneration (Note 21) 441 440 Contribution to Employees’ Provident Fund 1,958 1,806 Other allowances 422 443 Benefits-in-kind 62 62 ──────── ────────

16,098 14,923 ════════ ════════

28 RISK MANAGEMENT FRAMEWORK The Company being a member of the Tokio Marine Holdings, Inc. Group of Companies takes into

consideration the risk management philosophy and business strategy of Tokio Marine Group when managing the risk of the Company. The Company aims to assume risks that are consistent with maintaining its solvency and supporting its business objectives. The Company is selective in its approach to risk taking, striking a balance between risk accepted and the reward it can derive from accepting that risk.

The Board of Directors is responsible for the overall establishment, supervision and review of all risk

management processes in the Company. The Board is assisted by the Company’s Risk Management and Compliance Committee in the identification, evaluation and assessment of risks in the Company.

The compositions, functions and the responsibilities of Risk Management and Compliance Committee are explained in the Directors’ Report.

The Company’s risk management strategy includes maintaining sound, robust and effective risk

management processes which are appropriate to the nature, scale and complexity of the Company’s life insurance business to safeguard the interests of Company’s shareholders as well as to protect the Company’s policyholders’ interests. The risks are classified into broad categories to streamline the risk management processes and are not meant to be restrictive as to the risk identification and evaluation process.

Registration No.

199801001430 (457556-X)

93



28 RISK MANAGEMENT FRAMEWORK (CONTINUED) The following are the four broad categories of risks faced by the Company:

A. Business Risks Business risks arise from the Company’s business strategy, the environment in which the

Company operates, and its ability to provide suitable products and services to customers. The Company provides insurance protection against risks such as mortality and morbidity risks.

Within the business risks, insurance risk has significant impact on business results. Insurance

risks arise with respect to the adverse change in the value of insurance liabilities, resulting from changes in the level, trend, or volatility of a number of insurance risk drivers. This includes adverse mortality, longevity, morbidity, persistency and expense experience. The definition and management of insurance risks are explained in Note 30 to the financial statements.

The Company has in place various risk management techniques to control and optimise the

Company’s exposure to business risks in pursuit of the Company’s business objectives. New risks are assessed before they are considered for acceptance.

B. Financial Risks Financial risks pertain to credit risks, liquidity risks and market risks. Credit risks is the risk of

loss for the Company’s business, or of adverse change in the financial situation resulting from fluctuations in the credit standing of issuers of securities, counterparties and any debtors in the form of default or other significant credit event.

Liquidity risk refers to the possibility of the Company having insufficient cash resources to

meet its financial obligations as they fall due under business as usual and stress scenarios. The Company is exposed to market risk arising from its investment in debt securities, equities

and properties. Changes in interest rates, foreign exchange rates, and equity prices will impact the financial position of the Company as any reaction to market changes will affect the present and future earnings of the Company for the life insurance operations and shareholders’ equity.

The definition and management of financial risks are explained in Note 31 to the financial

statements. C. Operational Risks

Operational risks may arise from inadequate or failed internal processes and controls, from personnel and systems, or from external events such as sudden disasters crippling the operations of the Company. Such risks, although difficult to quantify, have the potential to impose significant costs and disruption to the financial soundness and ongoing business of the Company. Business continuity risks are the risks of not being able to resume normal business operations in view of disruption which include civil, economic, natural disasters, etc. Such risks may cause the Company to be unable to continue business as a going concern due to significant financial losses or the destruction of lives and infrastructures arising from natural catastrophes. The Company has put in place measures to control and minimise the Company’s exposure to operational risks.

Registration No.

199801001430 (457556-X)

94



28 RISK MANAGEMENT FRAMEWORK (CONTINUED) The following are the four broad categories of risks faced by the Company: (continued)

D. Technology Risks Technology risks emanating from the use of IT and the Internet. These risks arise from failures

or breaches of IT systems, applications, platforms or infrastructure, which could result in financial loss, disruptions in, our services or operations, or reputational harm. The Company is committed to minimize the exposure and impact of technology risk by putting in measures and controls to ensure confidentiality, availability of information and information processing facilities including critical systems and infrastructure to be protected against cyberattacks, fraudulent activities, information loss and other security risks and threats arising internally and externally.

29 CAPITAL MANAGEMENT

The Company’s capital management objective is to maintain a strong capital position with optimum buffer to meet obligations towards policyholders and to comply with the required capital requirements. A. Investment Management The investment portfolio of the Company which forms the largest asset pool is managed by

an investment team through setting of investment policy and strategic asset allocation. The investment limits are set and monitored at various levels to ensure that all investment activities are within the guidelines set by the local statutory requirements governed by BNM.

B. Regulatory Capital Framework

Regulatory capital is the minimum amount of assets that must be held throughout the financial year to meet statutory solvency requirements governed under the RBC Framework. As part of the statutory requirements, the Company is required to provide its capital position on a quarterly basis to BNM.

The capital structure of the Company, consisting of all funds, as at the date of statements of

financial position, as prescribed under the RBC Framework is provided below: Note 2019 2018 RM’000 RM’000 Eligible Tier 1 Capital Share capital (paid-up) 9 226,000 226,000 Reserves, including retained earnings 1,943,451 1,970,784 Tier 2 Capital 516,017 482,956 Amount deducted from capital (11,855) (39,523) ──────── ────────

Total capital available 2,673,613 2,640,217 ════════ ════════

The Company has met both the minimum and internal capital requirements specified in the

RBC Framework for the financial years ended 31 December 2018 and 31 December 2019.

Registration No.

199801001430 (457556-X)

95



30 INSURANCE RISKS The risk under any one life insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the nature of an insurance contract, this risk is random and therefore unpredictable. For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the Company faces under its insurance contracts is that the actual claims and benefit payments exceed the carrying amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits will vary from year to year from the estimate. A more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. Stress testing on the financial condition is conducted regularly to assess its ability to withstand adverse deviations in various assumptions. A dynamic solvency testing is performed annually to monitor its solvency position. Concentration of life insurance contract liabilities The table below shows the concentration of life insurance contract liabilities (comprise actuarial liabilities, unallocated surplus, provision for outstanding claims and net asset value attributable to unitholders) by types of contract: Gross With DPF Without DPF Total RM’000 RM’000 RM’000 31 December 2019 Whole of life 2,291,181 433,831 2,725,012 Endowment 2,603,314 365,721 2,969,035 Term-mortgage - 354,062 354,062 Term-others - 305,363 305,363 Medical and health - 9,076 9,076 Riders 21,353 135,245 156,598 Other plans 155,588 154,422 310,010 ──────── ──────── ────────

Total 5,071,436 1,757,720 6,829,156 ════════ ════════ ════════

31 December 2018 Whole of life 2,064,245 297,292 2,361,537 Endowment 2,910,729 235,440 3,146,169 Term-mortgage - 334,269 334,269 Term-others - 284,914 284,914 Medical and health - 14,190 14,190 Riders 29,165 67,363 96,528 Other plans 126,147 98,507 224,654 ──────── ──────── ────────

Total 5,130,286 1,331,975 6,462,261 ════════ ════════ ════════

There is no annuity business in force as at 31 December 2019 and 31 December 2018.

Registration No.

199801001430 (457556-X)

96



30 INSURANCE RISKS (CONTINUED) Key assumptions Material judgement is required in determining the liabilities and in the choice of assumptions. Assumptions in use are based on past experience, current internal data, external market indices and benchmarks which reflect current observable market prices and other published information. All assumptions are reviewed and updated, if necessary, each financial year in order to value insurance contract liabilities that reflect the Company’s experience. The assumptions are required to be on best estimate basis, where actual experience has equal chance of being better or worse than estimated. (a) Mortality and morbidity Mortality assumptions used are based on annual investigation into their respective mortality

experience over the recent financial years, and are expressed as a percentage of a standard mortality table.

The morbidity assumptions for dread disease benefits are based on a percentage of the

reinsurer’s risk premium rates. (b) Lapse and surrender rates

Lapse and surrender assumptions are based on an annual investigation into their respective withdrawal experience over the recent financial years, and are expressed as rates of withdrawal, split by duration in-force.

(c) Discount rate For the participating business, discount rates used to value insurance contract liabilities is

determined based on the best estimate investment returns. To determine the best estimate investment returns, the Company has broken down the assets

in the fund as at the reporting date into various asset classes, and has applied long term expected returns to each class. A weighted average rate of investment return is then derived by combining different proportions of the various asset classes.

Contract liabilities for non-participating business and guaranteed liabilities of the participating

business are computed by discounting policy cash flows using risk-free interest rates. The risk-free rates used are derived from the gross yields to redemption of benchmark government securities as at the date of valuation.

Registration No.

199801001430 (457556-X)

97



30 INSURANCE RISKS (CONTINUED) Sensitivities The Company conducted a sensitivity analysis on the actuarial liabilities as at the date of the statements of financial position, based on the change in one specific assumption while holding all other assumptions constant. Sensitivity information will also vary according to the current economic assumptions. Impact on Change in gross Impact on Impact on Assumption assumption actuarial liabilities profit after tax equity RM’000 RM’000 RM’000 31 December 2019 Worsening of mortality/morbidity +25% 157,296 (101,006) (101,006) Improvement in mortality/morbidity −25% (154,088) 96,113 96,113 Worsening of lapse and surrender rates +25% (92,289) 10,551 10,551 Improvement in lapse and surrender rates −25% 114,308 (13,782) (13,782) Increase in discount rate 100 basis points upward shift (403,348) 88,017 88,017 Decrease in discount rate 100 basis points downward shift 525,525 (104,477) (104,477) 31 December 2018 Worsening of mortality/morbidity +25% 141,936 (88,918) (88,918) Improvement in mortality/morbidity −25% (143,728) 88,173 88,173 Worsening of lapse and surrender rates +25% (66,599) 1,390 1,390 Improvement in lapse and surrender rates −25% 82,975 (3,538) (3,538) Increase in discount rate 100 basis points upward shift (357,345) 67,056 67,056 Decrease in discount rate 100 basis points downward shift 482,313 (80,352) (80,352) The method used and significant assumptions made for deriving sensitivity information did not change from the previous financial year.

Registration No.

199801001430 (457556-X)

98



31 FINANCIAL RISKS The Company is exposed to a range of financial risks, including credit risk, liquidity risk and market

risk. Financial risks of investment-linked investment is not further provided and analysed as the financial

risks in respect of investment-linked investments are generally wholly borne by the policyholders, and do not directly affect the profit before tax of the Company. Furthermore, investment-linked policyholders are responsible for allocation of the policy values amongst investment options offered by the Company. Although profit before tax is not affected by investment-linked investments, the investment return from such financial investments is included in the Company’s profit or loss, as the Company has selected the fair value option for all investment-linked investments with corresponding change in insurance contract liabilities for investment-linked contracts.

Credit Risk

The Company is exposed to credit risk through investments in cash, money market and debt instruments, lending activities and exposure to counterparty’s credit in reinsurance contracts.

For all three types of exposures, financial loss may materialise as a result of default by the borrower or counterparty. For investments in cash, money market and debt instruments, financial loss may also materialise as a result of a default by the issuer on coupon payment or principal amount. The Company has internal limits by issuer or counterparty and by investment grades. These limits are actively monitored to manage the credit and concentration risk. These limits are reviewed on a regular basis by the management. The creditworthiness of reinsurers is assessed on an annual basis by reviewing their financial strength through published credit ratings and other publicly available financial information. The Company manages its lending activities by extending loans against collateral pledged to the Company. Regular monitoring and review of the payments of loans are performed by the Company to identify any non-performing loans. Any non-performing loan identified is communicated to the management. Appropriate actions will be taken for the possible course of recovery and provision of these loans. There were no significant changes to the credit risk management of the Company. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets.

Registration No.

199801001430 (457556-X)

99



31 FINANCIAL RISKS (CONTINUED)

Credit Risk (continued)

Credit exposure by credit rating

The table below provides information regarding the credit risk exposure of the Company by classifying financial assets in accordance with the Company’s credit ratings of counterparties:

Neither past due nor impaired Impaired Investment grade

(AAA to A-) Not rated Not rated Total RM’000 RM’000 RM’000 RM’000

31 December 2019 AFS financial assets Debt securities 2,423,051 1,598,566 - 4,021,617 FVTPL financial assets Debt securities 308,897 98,546 - 407,443 HTM financial assets Debt securities 172,616 791,108 - 963,724 Loans and receivables Loans - 461,177 - 461,177 Insurance receivables - 29,590 - 29,590 Other receivables* - 34,219 - 34,219 Cash and cash equivalents 354,463 - - 354,463 ──────── ──────── ──────── ────────

3,259,027 3,013,606 - 6,272,633 ════════ ════════ ════════ ════════

31 December 2018 AFS financial assets Debt securities 2,406,261 1,463,145 - 3,869,406 FVTPL financial assets Debt securities 246,717 71,134 - 317,851 HTM financial assets Debt securities 192,865 792,135 - 985,000 Loans and receivables Loans - 484,335 - 484,335 Insurance receivables - 56,404 - 56,404 Other receivables* - 17,173 - 17,173 Cash and cash equivalents 512,104 - - 512,104 ──────── ──────── ──────── ────────

3,357,947 2,884,326 - 6,242,273 ════════ ════════ ════════ ════════

*Exclude prepayments of RM662,000 as at 31 December 2019 (2018: RM466,000).

Registration No.

199801001430 (457556-X)

100



31 FINANCIAL RISKS (CONTINUED) Credit Risk (continued) The financial assets are classified according to the credit rating by rating agencies approved by BNM.

The creditworthiness of the debt securities is assessed by way of credit reviews performed on the issuers on an annual basis. The financial assets which are not rated mainly comprise Malaysian government securities, corporate debt securities guaranteed by the Federal Government of Malaysia and loans. The corporate debt securities, although not rated are issued or guaranteed by the Federal Government of Malaysia which carry minimal credit risk. The Company’s loans receivable include policy loans, mortgage loans and other secured loans to staff and policyholders. Policy loans and mortgage loans are generally secured by collateral. The amount of loan is based on the valuation of collateral as well as an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of the types of collateral and the valuation parameters. The type of collaterals, held by the Company as lender, for which it is entitled to in the event of default is as follows: Carrying Carrying value value Type of collaterals 2019 2018 RM’000 RM’000 Policy loans Cash surrender value 460,216 483,310 Mortgage loans Properties 961 1,010 Secured loans Motor vehicle - 15 ──────── ────────

461,177 484,335 ════════ ════════

Registration No.

199801001430 (457556-X)

101




Credit Risk (continued) As at 31 December 2019, the impairment allowance of insurance receivables of RM29.6 million is RM0.2 million (2018: RM0.4 million), and the impairment allowance of other receivables is RM0.8 million (2018: RM0.4 million). Impairment of insurance receivables and other receivables are performed based on a collective assessment. No collateral is held as security for any impaired assets. The Company records impairment loss for insurance receivables and other receivables in separate allowance accounts. A reconciliation of the allowance for impairment losses for insurance receivables and other receivables are as follows: Insurance receivables 2019 2018 RM’000 RM’000

At 1 January 399 1,475 Decrease during the financial year (206) (1,076) ──────── ────────

At 31 December 193 399 ════════ ════════

Other receivables

2019 2018 RM’000 RM’000 At 1 January 427 1,909 Increase/(decrease) during the financial year 392 (1,482) ──────── ────────

At 31 December 819 427 ════════ ════════

Registration No.

199801001430 (457556-X)

102




Liquidity Risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial instruments. In respect of catastrophic events, there is also a liquidity risk associated with the timing differences between gross cash outflows and expected reinsurance recoveries. The liquidity demands of the Company are met through ongoing operations which include continuous premium income and investment income. The expected liquidity needs are often met through projection of outflows from the in-force insurance policy contract liabilities; the liabilities include renewal commissions, claims and other benefits (maturity and surrender). Whilst the nature of these outflows is deemed to be largely stable and can be assumed at outset, the Company remains susceptible to exceptional experiences (surrender or catastrophic events) for its insurance portfolio. Also, the Company may be subject to unexpected liquidity tightening due to adverse implications from the wider economic factors (domestic or global) or undue volatilities and unexpected losses experienced within investments. Liquidity risk is reduced by having insurance contract liabilities that are well diversified by product and policyholder. The Company designs insurance products to encourage policyholders to maintain their policies-in-force, thereby generating a diversified and stable flow of recurring premium income. The Company adopts prudent liquidity risk management by monitoring daily liquidity and cash movements to ensure liquidity is available and cash is employed optimally. The Company has cash and cash equivalents of RM354.5 million as at 31 December 2019 (2018: RM512.1 million) to meet its liquidity requirements. Demands for funds can usually be met through ongoing normal operations, premiums received, sale of assets or borrowings. Unexpected demands for liquidity may be triggered by negative publicity, deterioration of the economy, reports of problems in other companies in the same or similar lines of business, unanticipated policy claims, or other unexpected cash demands from policyholders. Expected liquidity demands are managed through a combination of treasury, investment and capital management practices, which are monitored on an ongoing basis. Actual and projected cash inflows and outflows are monitored and a reasonable amount of assets are kept in liquid instruments at all times. The projected cash flows from the in-force insurance policy contract liabilities consist of renewal premiums, commissions, claims, maturities and surrenders. Renewal premiums, commissions, claims and maturities are generally stable and predictable. Surrenders can be more uncertain although it has been quite stable over the past several years. Unexpected liquidity demands are managed through a combination of product design, diversification limits, investment strategies and systematic monitoring. The existence of surrender penalty in insurance contracts also protects the Company from losses due to unexpected surrender trends as well as reduces the sensitivity of surrenders to changes in interest rates.

Registration No.

199801001430 (457556-X)

103




Liquidity Risk (continued) Maturity profiles of financial assets

The table below summarises the maturity profile of the financial assets of the Company: Up to 1 1 – 5 Over 5 No maturity year years years date Total RM’000 RM’000 RM’000 RM’000 RM’000 31 December 2019 AFS financial assets 407,014 1,096,723 2,517,880 1,737,769 5,759,386 FVTPL financial assets 28,535 145,953 232,955 688,695 1,096,138 HTM financial assets 10,125 40,677 912,922 - 963,724 Loans and receivables - - - 461,177 461,177 Insurance receivables 29,590 - - - 29,590 Other receivables* 34,619 - - - 34,619 Cash and cash equivalents 354,463 - - - 354,463 ──────── ──────── ──────── ──────── ────────

Total financial assets 864,346 1,283,353 3,663,757 2,887,641 8,699,097 ════════ ════════ ════════ ════════ ════════

31 December 2018 AFS financial assets 320,275 1,146,775 2,402,356 1,482,693 5,352,099 FVTPL financial assets 30,289 112,548 175,013 542,721 860,571 HTM financial assets 20,160 50,881 913,959 - 985,000 Loans and receivables - - - 484,335 484,335 Insurance receivables 56,404 - - - 56,404 Other receivables* 17,173 - - - 17,173 Cash and cash equivalents 512,104 - - - 512,104 ──────── ──────── ──────── ──────── ────────

Total financial assets 956,405 1,310,204 3,491,328 2,509,749 8,267,686 ════════ ════════ ════════ ════════ ════════

*Exclude prepayments of RM662,000 as at 31 December 2019 (2018: RM466,000).

Registration No.

199801001430 (457556-X)

104



31 FINANCIAL RISKS (CONTINUED) Liquidity Risk (continued)

Maturity profiles of financial liabilities

The table below summarises the maturity profile of the financial liabilities of the Company: Up to 1 1 – 5 Over 5 year years years Total RM’000 RM’000 RM’000 RM’000 31 December 2019 Insurance contract liabilities*: With DPF 590,191 811,134 3,670,111 5,071,436 Without DPF 741,866 58,404 957,450 1,757,720 Insurance payables 522,603 - - 522,603 Lease liabilities 543 - - 543 Other payables 64,248 - - 64,248 ──────── ──────── ──────── ────────

Total financial liabilities 1,919,451 869,538 4,627,561 7,416,550 ════════ ════════ ════════ ════════

31 December 2018 Insurance contract liabilities*: With DPF 566,075 1,063,775 3,500,436 5,130,286 Without DPF 495,730 54,030 782,215 1,331,975 Insurance payables 508,263 - - 508,263 Other payables 62,906 - - 62,906 ──────── ──────── ──────── ────────

Total financial liabilities 1,632,974 1,117,805 4,282,651 7,033,430 ════════ ════════ ════════ ════════

* Excluding AFS fair value adjustment and asset revaluation surplus adjustment. Investment-linked liabilities are repayable or transferable on demand and are included in the “up to 1 year” column. Repayments which are subject to notice are treated as if notice was to be given immediately.

Registration No.

199801001430 (457556-X)

105



31 FINANCIAL RISKS (CONTINUED) Market Risk (a) Currency Risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company’s primary transactions are carried out in Ringgit Malaysia (“RM”). The Company is exposed to foreign exchange risk primarily from transactions denominated in foreign currencies such as Singapore Dollar (“SGD”) and others pertaining to investment activities. The management manages foreign currency risk by setting limits and monitoring the exposure to foreign currency on a regular basis.

As the Company’s business is conducted primarily in Malaysia, the Company’s financial assets are also primarily maintained in Malaysia as required under the Financial Services Act, 2013, and hence, primarily denominated in the same currency (the local RM) as its insurance contract liabilities. Thus, the main foreign exchange risk from recognised assets and liabilities arises from transactions other than those in which insurance contract liabilities are expected to be settled.

Currency risk arising from investments in foreign currency instruments is generally not hedged as the Company’s exposure is minimal.

The analysis below summarises the currency exposure of the Company. 31 December 2019

’000 SGD RM Others Total Financial assets AFS financial assets - 5,759,386 - 5,759,386 FVTPL financial assets - 722,085 374,053 1,096,138 HTM financial assets - 963,724 - 963,724 Loans and receivables - 461,177 - 461,177 Insurance receivables - 29,590 - 29,590 Other receivables* - 34,619 - 34,619 Cash and cash equivalents - 354,463 - 354,463 ──────── ──────── ──────── ────────

- 8,325,044 374,053 8,699,097 ════════ ════════ ════════ ════════

Financial liabilities Insurance contract liabilities** - 6,829,156 - 6,829,156 Insurance payables - 522,603 - 522,603 Lease liabilities - 543 - 543 Other payables - 64,248 - 64,248 ──────── ──────── ──────── ────────

- 7,416,550 - 7,416,550 ════════ ════════ ════════ ════════

Registration No.

199801001430 (457556-X)

106



31 FINANCIAL RISKS (CONTINUED) Market Risk (continued) (a) Currency Risk (continued) 31 December 2018 ’000 SGD RM Others Total Financial assets AFS financial assets - 5,352,099 - 5,352,099 FVTPL financial assets - 530,761 329,810 860,571 HTM financial assets - 985,000 - 985,000 Loans and receivables - 484,335 - 484,335 Insurance receivables - 56,404 - 56,404 Other receivables* - 17,173 - 17,173 Cash and cash equivalents - 512,104 - 512,104 ──────── ──────── ──────── ────────

- 7,937,876 329,810 8,267,686 ════════ ════════ ════════ ════════

Financial liabilities Insurance contract liabilities** - 6,462,261 - 6,462,261 Insurance payables - 508,263 - 508,263 Other payables - 62,906 - 62,906 ──────── ──────── ──────── ────────

- 7,033,430 - 7,033,430 ════════ ════════ ════════ ════════

* Exclude prepayments of RM662,000 as at 31 December 2019 (2018: RM466,000).

** Excluding AFS fair value adjustment and asset revaluation surplus adjustment. The potential impacts arising from currency risk are deemed insignificant. Accordingly, no sensitivity analysis is being disclosed.

Registration No.

199801001430 (457556-X)

107



31 FINANCIAL RISKS (CONTINUED) Market Risk (continued) (b) Interest Rate/Profit Yield Risk Interest rate risk is the risk that the value or future cash flows of a financial instrument will

fluctuate because of changes in market interest rate/profit yield. A study of movement in risk-free rate is undertaken for the market. A 40 (2018: 50) basis point

movement in the interest rate market is considered to be reasonable basis for interest rate sensitivity analysis. Investments in debt securities held-to-maturity are excluded as these are accounted for at amortised cost, and their carrying amounts are not sensitive to changes in the level of interest rates.

For investment-linked funds, the risk exposure to the Company is limited only to the

underwriting aspect as all investment risks are borne by the policyholders. The analysis below summarises the Company’s sensitivity analysis. Impact on Impact on insurance profit Impact on Change in variables contract liabilities after tax equity RM’000 RM’000 RM’000 31 December 2019 +40 basis points (54,200) (2,717) (35,009) −40 basis points 56,734 2,843 36,820

════════ ════════ ════════

31 December 2018 +50 basis points (70,281) (2,746) (34,514) −50 basis points 74,212 2,906 36,672

════════ ════════ ════════

Registration No.

199801001430 (457556-X)

108



31 FINANCIAL RISKS (CONTINUED) Market Risk (continued) (c) Price Risk Equity price risk is the risk that the fair value or future cash flows of a financial instrument will

fluctuate because of changes in market prices (other than those arising from interest rate/profit yield risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer or factors affecting similar financial instruments traded in the market.

The Company’s equity price risk exposure relates to financial assets and financial liabilities

whose values will fluctuate as a result of changes in market prices, principally investment in securities not held for the account of investment-linked business.

The Company’s price risk policy requires it to manage such risks by setting and monitoring

objectives and constraints on investments, diversification plans, limits on investments in each country, sector, market and issuer, having regard also to such limits stipulated by BNM. The Company complies with BNM stipulated limits during the financial year, and has no significant concentration of price risk.

The analysis below summarises the Company’s price risk analysis. Impact on Impact on Change in insurance profit Impact on Market indices variables contract liabilities after tax equity RM’000 RM’000 RM’000 31 December 2019 Bursa Malaysia +10% 157,275 4,573 12,031 Bursa Malaysia −10% (157,275) (5,625) (12,031) ════════ ════════ ════════

31 December 2018 Bursa Malaysia +10% 136,350 3,930 8,090 Bursa Malaysia −10% (136,350) (4,955) (8,090) ════════ ════════ ════════

Registration No.

199801001430 (457556-X)

109



32 INSURANCE FUND The Company’s activities are organised by funds and segregated into the Life Fund and Shareholders’ Fund (“SHF”) in accordance with the Financial Services Act, 2013 and Insurance Regulations, 1996. The Company’s statement of financial position and statement of comprehensive income have been further analysed by funds which includes Life Fund and the SHF. The Life insurance business offers a wide range of participating and non-participating Whole of Life, Term Assurance, Endowment and Investment-linked products. Management has determined the operating segments based on the reports reviewed by the Chief Executive Officer (Chief Operating decision maker). The Company has two operating segments comprises Life Fund and Shareholders’ Fund in Malaysia.

Registration No.

199801001430 (457556-X)

110



32 INSURANCE FUNDS (CONTINUED) Statement of Financial Position by Funds Shareholders’ Fund Life Fund Inter-fund elimination Total 2019 2018 2019 2018 2019 2018 2019 2018 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 ASSETS Property, plant and equipment - - 175,480 174,798 - - 175,480 174,798 Right-of-use assets - - 508 - - - 508 - Investment properties - - 168,104 159,095 - - 168,104 159,095 Intangible assets - 25,249 11,855 14,273 - - 11,855 39,522 Financial investments AFS financial assets 207,337 222,779 5,552,049 5,129,320 - - 5,759,386 5,352,099 FVTPL financial assets 7,749 7,646 1,088,389 852,925 - - 1,096,138 860,571 HTM financial assets - - 963,724 985,000 - - 963,724 985,000 Loans and receivables 285 327 460,892 484,008 - - 461,177 484,335 Insurance receivables - - 29,590 56,404 - - 29,590 56,404 Other receivables 23,022 24,734 31,262 13,331 (19,003) (20,426) 35,281 17,639 Cash and bank balances 7,376 12,848 347,087 499,256 - - 354,463 512,104 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

TOTAL ASSETS 245,769 293,583 8,828,940 8,368,410 (19,003) (20,426) 9,055,706 8,641,567 ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════

EQUITY, POLICYHOLDERS’ FUNDS AND LIABILITIES Share capital 226,000 226,000 - - - - 226,000 226,000 Retained earnings 17,222 64,001 635,257 604,901 - - 652,479 668,902 Available-for-sale reserve 3,029 806 64,079 12,292 - - 67,108 13,098 Asset revaluation reserve - - 3,208 3,029 - - 3,208 3,029 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

TOTAL EQUITY 246,251 290,807 702,544 620,222 - - 948,795 911,029 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Registration No.

199801001430 (457556-X)

111



32 INSURANCE FUNDS (CONTINUED) Statement of Financial Position by Funds (continued) Shareholders’ Fund Life Fund Inter-fund elimination Total 2019 2018 2019 2018 2019 2018 2019 2018 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Insurance contract liabilities - - 7,258,035 6,925,261 - - 7,258,035 6,925,261 Insurance payables - - 522,603 508,263 - - 522,603 508,263 Lease liabilities - - 543 - - - 543 - Other payables - 1,546 83,251 81,786 (19,003) (20,426) 64,248 62,906 Provision for agency long association benefits - - 31,378 29,480 - - 31,378 29,480 (Tax recoverable)/current tax liabilities (1,292) 1,179 15,309 7,168 - - 14,017 8,347 Deferred tax liabilities 810 51 215,277 196,230 - - 216,087 196,281 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

TOTAL POLICYHOLDERS’ FUNDS AND LIABILITIES (482) 2,776 8,126,396 7,748,188 (19,003) (20,426) 8,106,911 7,730,538 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

TOTAL EQUITY, POLICYHOLDERS’ FUNDS AND LIABILITIES 245,769 293,583 8,828,940 8,368,410 (19,003) (20,426) 9,055,706 8,641,567 ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════

Additional information: Purchase of property, plant and equipment - - 3,805 6,392 - - 3,805 6,392 Purchase of intangible assets - - 4,446 2,155 - - 4,446 2,155

Registration No.

199801001430 (457556-X)

112



32 INSURANCE FUNDS (CONTINUED) Statement of Comprehensive Income by Funds Shareholders’ Fund Life Fund Inter-fund elimination Total 2019 2018 2019 2018 2019 2018 2019 2018 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Gross earned premium revenue - - 1,321,334 1,311,098 - - 1,321,334 1,311,098 Premiums ceded to reinsurers - - (44,485) (39,425) - - (44,485) (39,425) ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Net earned revenue - - 1,276,849 1,271,673 - - 1,276,849 1,271,673 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Investment income 11,105 10,495 338,917 337,577 - - 350,022 348,072 Net realised gains/(losses) 67 663 149,774 (2,870) - - 149,841 (2,207) Net fair value gains/(losses) 103 56 69,527 (73,918) - - 69,630 (73,862) Commission income - - 3,445 5,152 - - 3,445 5,152 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Other income 11,275 11,214 561,663 265,941 - - 572,938 277,155 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Gross benefits and claims paid - - (1,149,889) (1,000,472) - - (1,149,889) (1,000,472) Claims ceded to reinsurers - - 31,188 38,021 - - 31,188 38,021 Gross change to insurance contract liabilities - - (330,608) (120,587) - - (330,608) (120,587) ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Net insurance benefits and claims - - (1,449,309) (1,083,038) - - (1,449,309) (1,083,038) ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Registration No.

199801001430 (457556-X)

113



32 INSURANCE FUNDS (CONTINUED) Statement of Comprehensive Income by Funds (continued) Shareholders’ Fund Life Fund Inter-fund elimination Total 2019 2018 2019 2018 2019 2018 2019 2018 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Commission and agency expenses (4,469) (1,504) (142,404) (131,519) - - (146,873) (133,023) Management expenses (28,394) (31,355) (152,638) (146,746) - - (181,032) (178,101) Other operating (expenses)/income- net (1,294) - 44 1,995 - - (1,250) 1,995 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Other expenses (34,157) (32,859) (294,998) (276,270) - - (329,155) (309,129) ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Inter-fund transfer: From Life Fund to SHF 16,258 18,931 (16,258) (18,931) - - - - ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

(Loss)/profit before taxation (6,624) (2,714) 77,947 159,375 - - 71,323 156,661 Taxation (3,455) (3,599) (47,591) (44,969) - - (51,046) (48,568) ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Net (loss)/profit for the financial year (10,079) (6,313) 30,356 114,406 - - 20,277 108,093 ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════

Registration No.

199801001430 (457556-X)

114



32 INSURANCE FUNDS (CONTINUED) Statement of Comprehensive Income by Funds (continued) Shareholders’ Fund Life Fund Inter-fund elimination Total 2019 2018 2019 2018 2019 2018 2019 2018 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Other comprehensive income/(loss): Items that will be reclassified subsequently to profit or loss Fair value change on available-for-sale financial assets: Net gains/(losses) arising during financial year 2,927 (512) 156,128 (136,038) - - 159,055 (136,550) Realised (gains)/losses transferred to profit or loss (3) 27 (137,532) (95,745) - - (137,535) (95,718) Impairment losses transferred to profit or loss - - 11,966 65,556 - - 11,966 65,556 Tax effects thereon (701) 116 (15,392) 10,225 - - (16,093) 10,341 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Fair value gains/(losses), net of tax 2,223 (369) 15,170 (156,002) - - 17,393 (156,371) Change in insurance contract liabilities arising from net fair value (gains)/losses - - 36,617 155,687 - - 36,617 155,687 ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Net fair value change 2,223 (369) 51,787 (315) - - 54,010 (684) ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Registration No.

199801001430 (457556-X)

115



32 INSURANCE FUNDS (CONTINUED) Statement of Comprehensive Income by Funds (continued) Shareholders’ Fund Life Fund Inter-fund elimination Total 2019 2018 2019 2018 2019 2018 2019 2018 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Other comprehensive income/(loss): (continued) Items that will not be reclassified subsequently to profit or loss Asset revaluation reserve: Gross asset revaluation surplus - - 2,957 6,979 - - 2,957 6,979 Tax effects thereon - - (282) (1,315) - - (282) (1,315) ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Asset revaluation surplus, net of tax - - 2,675 5,664 - - 2,675 5,664 Change in insurance contract liabilities arising from net asset revaluation surplus - - (2,496) (5,931) - - (2,496) (5,931) ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Net asset revaluation surplus/(deficit) - - 179 (267) - - 179 (267) ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Total other comprehensive income/(loss) 2,223 (369) 51,966 (582) - - 54,189 (951) ──────── ──────── ──────── ──────── ──────── ──────── ──────── ────────

Total comprehensive (loss)/income for the financial year (7,856) (6,682) 82,322 113,824 - - 74,466 107,142 ════════ ════════ ════════ ════════ ════════ ════════ ════════ ════════

Registration No.

199801001430 (457556-X)

116



32 INSURANCE FUNDS (CONTINUED) Statement of Comprehensive Income by Funds (continued) Shareholders’ Fund Life Fund Inter-fund elimination Total 2019 2018 2019 2018 2019 2018 2019 2018 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 Additional information: Interest income 7,362 7,964 280,703 274,897 - - 288,065 282,861 Interest expenses - - (983) (843) - - (983) (843) Depreciation - - (6,504) (5,929) - - (6,504) (5,929) Amortisation (25,250) (25,249) (6,987) (6,818) - - (32,237) (32,067)

Registration No.

199801001430 (457556-X)

117



33 INVESTMENT-LINKED FUND The statement of financial position and statement of comprehensive income of investment-linked fund

represent the assets, liabilities and net asset values of TokioMarine Orient Fund (“TMOF”), TokioMarine Enterprise Fund (“TMEF”), TokioMarine Bond Fund (“TMBF”), TokioMarine Dana Ikhtiar (“TMDI”) and TokioMarine Luxury Fund (“TMLX”). The statement of financial position of the investment-linked fund is represented by:

2019 2018 RM’000 RM’000 ASSETS Fair value through profit and loss financial assets 502,804 309,237 Other receivables 3,276 800 Cash and cash equivalents 42,769 60,935 Tax recoverable - 94 Deferred tax assets 184 286 ──────── ────────

TOTAL ASSETS 549,033 371,352 ════════ ════════

LIABILITIES Other payables 1,084 2,111 Current tax liabilities 864 - ──────── ────────

TOTAL LIABILITIES 1,948 2,111 ════════ ════════

Net asset value of funds (Note 11) 547,085 369,241 ════════ ════════

The statement of financial position has been adjusted for the following assets, liabilities and net asset

value of TokioMarine Managed Fund (“TMMF”) which have been eliminated as TMMF invested mainly in TMEF and TMBF during the financial year:

2019 2018 RM’000 RM’000 ASSETS Investments in other linked funds of insurer 225,898 129,380 Cash and cash equivalents 1 1 ──────── ────────

Net asset value of TMMF 225,899 129,381 ════════ ════════

Registration No.

199801001430 (457556-X)

118



33 INVESTMENT-LINKED FUND (CONTINUED) The statement of comprehensive income of the investment-linked fund is represented by:

2019 2018 RM’000 RM’000 Investment income 11,991 8,008 Fair value gains/(losses) on investments 11,554 (37,987) Other operating income - net 30 30 ──────── ────────

Other income/(loss) 23,575 (29,949) ──────── ────────

Management fees (4,959) (3,594) Management expenses (28) (25) ──────── ────────

Other expenses (4,987) (3,619) ──────── ────────

Profit/(loss) before tax 18,588 (33,568) Taxation (1,400) 2,725 ──────── ────────

Net profit/(loss) for the financial year 17,188 (30,843) ════════ ════════

The statement of comprehensive income have been adjusted for TokioMarine Managed Fund

(“TMMF”) which have been eliminated as TMMF invested mainly in TMEF and TMBF during the financial year:

2019 2018 RM’000 RM’000

Fair value gains/(losses) on investments 4,338 (8,731) Management expenses (6) (5) ──────── ────────

Net profit/(loss) for the financial year 4,332 (8,736) ════════ ════════

Registration No.

199801001430 (457556-X)

119



34 ADDITIONAL DISCLOSURE UNDER AMENDMENTS TO MFRS 4 INSURANCE CONTRACT LIABILITIES

The following additional disclosures, required by Amendments to MFRS 4 for entity qualified and

elected the temporary exemption from applying MFRS 9, present the Company’s financial assets by their contractual cash flows characteristics, which indicate if they are solely payments of principal and interest on the principal outstanding (“SPPI”):

Financial assets with SPPI cash flows

(RM’000)

All other financial assets

(RM’000)

Fair value at end of reporting date 5,617,113 2,592,839

Fair value changes during the financial year 188,156 (245,313)

Gross carrying amount under MFRS 139 by credit risk rating grades as defined in MFRS 7

5,617,113 2,592,839

Financial assets defined in MFRS 9 B5.5.22, to separately disclose the following financial assets that do not have low credit risk: - Fair value - Gross carrying amount

- -

* Insurance receivables and policy loans have been excluded from the above assessment as they

are under the scope of MFRS 4 ‘Insurance Contracts’. * Other than the financial assets included in the table above and assets that are within the scope of

MFRS 4 ‘Insurance Contracts’, all other assets in the statement of financial position are non-financial asset.

Registration No.

199801001430 (457556-X)

120



34 ADDITIONAL DISCLOSURE UNDER AMENDMENTS TO MFRS 4 INSURANCE CONTRACT LIABILITIES (CONTINUED) Financial assets with SPPI cash flows Government AAA AA A Guaranteed Unrated Total RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 31 December 2019 Investments Malaysian Government Securities - - - - 497,394 497,394 Malaysian Government Guaranteed Bond - - - 1,509,049 - 1,509,049 Government Investment Issues - - - - 407,690 407,690 Corporate debt securities 1,041,664 1,431,476 284,492 - 57,930 2,815,562 Loans - - - - 961 961 Other receivables - - - - 35,281 35,281 Cash and cash equivalents 229,833 124,578 - - 52 354,463 ──────── ──────── ──────── ──────── ──────── ────────

1,271,497 1,556,054 284,492 1,509,049 999,308 5,620,400 ════════ ════════ ════════ ════════ ════════ ════════

All financial assets with SPPI cash flows of the Company as at 31 December 2019 have low credit risk.

Registration No.

199801001430 (457556-X)

121



35 CHANGE IN ACCOUNTING POLICIES

Adoption of MFRS 16 ‘Leases’

The Company has adopted MFRS 16 ‘Leases’ issued by MASB with its mandatory adoption date of 1 January 2019. MFRS 16 supersedes MFRS 117 ‘Leases’ and the related interpretations. As permitted by MFRS 16, the Company has adopted the simplified transitional approach and will not restate comparative amounts for the financial year prior to first adoption. Right-of-use assets for property leases will be measured on transition as if the new rules had always been applied. All other right-of-use assets will be measured at the amount of the lease liability on adoption (adjusted for any prepaid or accrued lease expenses). On adoption of MFRS 16, the Company recognised lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of MFRS 117 ‘Leases’. These liabilities were measured at the present value of the remaining lease payments, discounted using the Company’s borrowing rate as of 1 January 2019. The weighted average incremental borrowing rate applied to the lease liabilities on 1 January 2019 for the Company was at 5.5%. Summarised below are the effects upon adoption of MFRS 16 as at 1 January 2019:

Effect on

31 December adoption 1 January

2018 of MFRS 16 2019

RM'000 RM'000 RM'000

Assets

Rights of use assets - 1,002 1,002

Liabilities

Lease liabilities - 1,002 1,002 The reconciliation on operating lease commitments under MFRS 117 to MFRS 16 are as follows:

RM'000

Operating lease commitments as at 31 December 2018 1,095

Adjustment for operating lease commitments 118

Discounted using the incremental borrowing rate (76) Less: Short-term and low-value leases recognised on a straight-line basis as expense (135)

Lease liability recognised as at 1 January 2019 1,002

The recognised right-of-use assets relate to the following types of assets: Properties 698

Office equipment 304

1,002

Registration No.

199801001430 (457556-X)

122



36 SUBSEQUENT EVENTS a) Exclusive bancassurance agreement

On 29 December 2014, the Company and RHB Bank Berhad had entered into an exclusive bancassurance agreement for a period of 10 years commencing from 1 January 2015 and ending on 31 December 2024 with a total facilitation fee of RM210 million. The first payment of RM126 million, being 60% of the facilitation fee was paid in January 2015. The second payment of RM84 million, being the balance 40% of the facilitation fee was paid in January 2020. Under the agreement, RHB Bank Berhad will only sell, distribute, market and promote conventional life insurance products of the Company.

b) In the first quarter 2020, the rapid spread of the Covid-19 has been declared a

pandemic. Globally, increasing measures are being taken to contain it, and these have led to a significant volatility in the financial markets and resulting in an adverse impact on the global business and economic activity.

There is an increasing likelihood that the Covid-19 and the continuous efforts could cause undesirable effects on the Malaysian economy. The Company is closely monitoring the developing situation and the potential impact of the spread of Covid-19 on its operations.

Financial Statement 2019 - Tokio Marine

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